0367183315

“Glenn Pearson does a masterful job making the complexities
easy and understandable, while providing industry outsiders

with recommendations on how to navigate the inner work-
ings of health systems. What I truly like about this book is that
both a seasoned health care executive and someone new to
the industry would find it equally valuable.”
Peter D. Banko
President & CEO Centura Health
“Peter Drucker believed that healthcare was the most complex of

human organizations. This book goes a long way to explain-
ing that complexity and making it simpler for a seller to mar-
ket its products or services to the healthcare market place.
Glenn’s experiences with the healthcare field lead to accuracy
in a commentary that can’t be beaten by works written by less
experienced writers. He knows what he is writing about!”
J. Larry Tyler, FACHE, FHFMA, CMPE
CEO of the Practical Governance Group
Chairman Emeritus of Tyler & Company
“Interesting, engaging and informative with good examples. As

Chief Medical Officer of a biotech startup that has to sell into
the C-suite, I will be buying copies for our entire sales team.”
Bob Lubitz, MD, MPH, FACHE, MACP
Chief Medical Officer, 3Oe Scientific, Inc.
“One of the underlying principles in this book is the impor-

tance of integrity and honesty in business dealings. Never say
anything that you don’t believe or cannot support.”
William Cleverley, Ph.D.
Professor Emeritus, Ohio State University
Chairman and Founder
Cleverley & Associates
“Thriving in the Healthcare Market offers real solutions and
innovative approaches to dealing with our country’s complex
and often-confusing healthcare market. The book promises to
be a helpful and important addition to healthcare thinking.”
Nancy Desmond
Co-founder and Former CEO of the
Center for Health Transformation
“I often cringe at the lack of financial analysis and credible

forecasting I see in many companies’ presentations. The ROI
discussion in Thriving in the Healthcare Market nails it! Any
entrepreneur can use it to produce projections that will stand
up to scrutiny and demonstrate value to both investors and
customers.”
Jason Rupp
Executive Director
Southeastern Medical Device Association
“Glenn’s expansive knowledge and in-depth industry experi-

ence is evident in “Thriving in the Healthcare Market.” Add
that to a clever writing style interwoven with anecdotes and
analogies, and it makes the reading fun and educational.
Hockey great Wayne Gretzky said “You miss 100% of the shots
you don’t take,” and Glenn scored on this one. A book sure to
be shared by many a salesperson and industry leader. GOAL!!!”
Robert Budman, MD
MBA CDI-P, Board Certified ABFM and
ABPM Informatics
CMIO Nuance Healthcare and former
CMIO Piedmont Healthcare
“One of the best ideas for a book I’ve heard in a long time. It
should be required reading for all vendors. Reading this book
would be one of the smartest things a healthcare salesperson
could do for their career.”
O.J. Booker
Healthcare Consultant and Hospital CEO
“Glenn delivers a well-organized narrative that demystifes the

many complexities and hidden pitfalls preventing entrepreneurs
from fnding success today. This is a must-read for any investor,
entrepreneur or technologist inspired to disrupt healthcare!”
Michael A. Levy
CEO and Co-Founder, Bluedoor Health
Co-Founder Digital Health Institute for Transformation
“The reader will know Glenn Pearson has ‘been there and
seen that.’”
William Moore
Retired Hospital CEO
President, Moore Business Groups, LLC
“This would be a great book for anyone preparing for a career

as a healthcare executive.”
Jeffrey Whitton, FACHE
Senior Director, Physician Practices
LifePoint Health
“This is wonderful. I got a good chuckle out of his scenarios.

This will be so helpful for those trying to ‘sell us.’ We see right
through all these ROI pledges from vendors. They make us
not trust the salesperson.”
Cathy H. Dougherty, FHFMA
Vice President, Revenue Cycle Management
Gwinnett Health System
“Pearson applies his high level of intellect to this book, yet he
presents his material in a way that is easy to digest.”
Jerry Fulks, FACHE
Retired President
WellStar West Georgia Medical Center
“Glenn Pearson’s explanation of how the healthcare system is

funded goes a long way towards helping the reader understand
the complexities of both the current environment and legislative
proposals being foated.”
Russ Lipari
Founder and CEO
Health Connect South
“The chapter on approaches for reforming the healthcare system

is a real highlight. I love the concepts he presents. Great ideas!”
Lance B. Duke, LFACHE
Healthcare Executive
“Glenn Pearson is like a one-man think tank.”

Joel Pieper
Atlanta Offce Managing Partner
Womble Bond Dickson law frm
“Great book!”
Kathy Reep, MBA
Vice President, Financial Services
Florida Hospital Association
Thriving in the
Healthcare Market
Strategies from an Industry-Insider
for Selling Your Product
Thriving in the
Healthcare Market
Strategies from an Industry-Insider
for Selling Your Product
Glenn E. Pearson, FACHE

CRC Press
Taylor & Francis Group
6000 Broken Sound Parkway NW, Suite 300
Boca Raton, FL 33487-2742
© 2020 by Glenn E. Pearson, FACHE

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To all the wonderful professional colleagues I’ve
been blessed to work with over the years
Contents
Acknowledgments ........................................................... xvii

About the Author .............................................................. xix
Introduction ...................................................................... xxi
1 The Jacked-Up World of Healthcare

Financing .................................................................1
Physicians ............................................................................ 1
Hospitals.............................................................................. 2
The Three-Legged Stool ..................................................... 4
How Healthcare Is Paid For................................................ 5
Medicaid .............................................................................. 9
Medicare .............................................................................13
The Uninsured ...................................................................16
The Need to Shift Costs.....................................................16
The Impact of These Dynamics on Hospitals ..................19
Did You Notice?..................................................................23
Final Thought.....................................................................23
End Notes ...........................................................................24
2 Six Things That Don’t Make Sense........................27
1. Fundamental Confusion about Who
the Customer Really Is and How That
Drives the Purchasing Decision.....................................27
2. The Underfunding of Medicare
and Medicaid ................................................................. 28
vii
viii ◾ Contents
3. Unfunded Mandates and Overbearing Regulation .......29

Emergency Medical Treatment
and Active Labor Act of 1986.....................................29
Health Insurance Portability
and Accountability Act of 1996..................................30
Other Regulatory Requirements ....................................31
4. Being at the Mercy of Others ........................................33
A Statewide, Retrospective Audit
of Inpatient Cases.......................................................33
Questionable Interpretation of Defnitions
of What Constitutes a True Medical Emergency .......37
Suffering Huge Payment Delays Because
of a Botched IT System Conversion ..........................38
5. Programs That Look Good on Paper but
Which Might Make No Sense in the Long Run.............39
6. The Lack of Uniform IT Communications
Protocols .........................................................................41
Final Thought.....................................................................43
End Notes ...........................................................................43
3 Three Ideas to Make Things Better.......................45

Idea 1 – Develop a Truly Effective
Preventive Care Approach ............................................ 46
Let’s Talk Prevention ......................................................49
Idea 2 – Revamp the Payment System to Create
a Public/Private Hybrid Approach.................................52
Idea 3 – Revamp the Payment System to Better
Refect Patient’s Likelihood to Need Healthcare
Services and to Better Incentivize Them ......................56
Final Thoughts .................................................................. 64
End Notes ...........................................................................65
4 The Six Fronts of the Healthtech

Revolution..............................................................67
Why Healthcare Is Behind in Adopting
Non-Clinical Technology .............................................. 68
Contents ◾ ix
Why Are Things Changing Now? ......................................74

Explosive Growth...............................................................75
Categorizing Healthcare Technology................................ 80
The Six Fronts of the Healthtech
Revolution.......................................................................83
End Notes ...........................................................................91
5 Timing Pitfalls .......................................................95
1. Launching Either Too Early or Too Late....................... 96
2. Failing to Get a Serious Hearing Because
You are a Start-Up..........................................................97
3. Launching a Product Before the Overall
Healthcare System Has Caught Up with
Its Financial Policies...................................................... 99
6 Credibility Pitfalls ...............................................103

4. Tipping Your Hand as a Healthcare
“Outsider” .....................................................................103
5. Violating an “Unspoken Rule” or Protocol
of the Industry..............................................................106
6. Showing Naïveté by Asking to See the
Hospital’s Strategic Plan So You Can See
Where You Can Help Them ........................................ 110
7. Showing Naïveté by Expecting a Hospital
to Become a Developmental Partner .......................... 111
8. Implying a Stronger Level of Support
or Endorsement from a Client or Reference................ 113
9. Offering a Clinical Product with Minimal
or No Demonstrated Clinical Validity
or Having Only Anecdotal Support............................. 114
10. Offering a Clinical Product without
Credible Clinicians as Part of the Organization
or Advisory Board........................................................ 116
11. Not Understanding the Difference
between Association and Causality............................. 116
12. Acting with Questionable Ethics ............................... 119
x ◾ Contents
13. Falsely Claiming to be the Only Company

That Offers a Particular Product, Service,
or Feature .....................................................................122
14. Jumping on the Bandwagon of the Latest
Healthcare Fad and Making Non-Credible
Claims about What Your Product Can Do ..................123
15. Not Having “Hometown Clients” ...............................124
16. Not Fully Appreciating the Lack
of “Uniformity” of Patient Inputs and, Therefore,
Overestimating the Potential Impact
of Your Solution ...........................................................125
End Note ..........................................................................127
7 Product Design Pitfalls........................................129
17. Answering a Question No One Is Asking .................129
18. Developing a Product without Adequate
Input from Potential Users ........................................... 131
19. Receiving Inadequate Input
from Your Advisory Board...........................................133
20. Getting Resistance from Providers
Because Your Product May Be Too Complicated
for Elderly or Non-Tech-Savvy Users...........................136
8 Market Misreading Pitfalls ..................................139

21. Failing to Recognize That the Healthcare
Field Is Not Monolithic.................................................139
22. Misusing “Guerilla Marketing” due
to Misreading the Organizational Climate................... 141
9 Data Pitfalls .........................................................143

23. Having Someone Challenge the
Quality and Integrity of Your Data, the
Relevance of Various Data Sources Brought
into a Big Data Project, or the Validity
of an Index Number You Create .................................143
24. Having the “Age” of Your Data
Challenged.................................................................... 147
Contents ◾ xi
25. Lacking Local and/or Regional Peer

Data for Benchmarking................................................ 150
26. Getting Trapped by the “Alarm
Fatigue Syndrome” ....................................................... 152
27. Not Recognizing Hurdles in Getting
Permissions to Access the Healthcare
Organization’s Data ...................................................... 154
Bonus Material – The “Art” of Interpreting Data ........ 154
End Note .......................................................................... 156
10 Technology Pitfalls .............................................. 157

⭆ 28. Introducing System Security and/or
Top 10
Privacy Vulnerabilities.................................................. 157
29. Failing to Offer a Product That
Is State-of-the Art Technologically............................... 158
30. Offering a Product or Service That
Taxes an Organization’s Infrastructure,
Thereby Introducing the Need for Additional
Capital Requirements and/or Delays ...........................160
31. Offering a Product That Does Not
Interface with Other Technologies Such
as Existing Systems or Devices.................................... 161
11 Communications Pitfalls......................................163
32. Offending the “Mission” Aspect
of Healthcare ................................................................163
⭆ 33. Not Being Able to “Break Through
Top 10
the Clutter” and Even Get a Hearing...........................165
Schedules......................................................................165
Emails ...........................................................................166
Using Leverage ............................................................. 167
34. Failing to Do the Research on Your
Competitors’ Products to the Point Where You Can
Credibly Show the Superiority of Your Product.......... 172
35. Focusing on “Features” Rather Than on How
Your Product Solves a Customer’s Problems............... 173
xii ◾ Contents
36. Having an Inadequate Web Page That Fails to Let

Potential Clients Understand What You Really Do........ 174
37. Cluttering Your Presentation and Marketing
Material with So Many Product Features,
Some of Which Are Not That Important,
That Your True Differentiators Get Buried ................. 178
38. Failing to “Layer” Your Message
and Tailor It to Various Audiences .............................. 179
39. Being So Concerned to Not Oversell
Your Product That You Undersell It ............................181
40. Presenting a Totally Unfocused Message ..................182
41. Being Unable to “Break Through”
and Convince the Healthcare Organization
It Truly Needs Your Product........................................184
42. Including Your Pricing on Your
Website or in Written Material.....................................186
43. Positioning Your Approach to “Sell What You
Have” Instead of Identifying Their Problems
and Solving Them ........................................................188
44. Not Doing Your Homework to Learn about
a Potential Client’s Situation and Looking Foolish
as a Result.....................................................................190
12 Return on Investment Pitfalls ............................. 191
⭆ 45. Thinking a Healthcare Organization Will
Top 10
Embrace Your Product or Service Even If You
Don’t Have a Clear, Demonstrable ROI....................... 192
⭆ 46. ROI Fallacy 1 – Not Realizing How Diffcult
Top 10
It Is to Actually Capture Potential Savings ..................194
47. ROI Fallacy 2 – Claiming That Using
Your Product Will Allow the Provider
to Bring in More Revenue............................................196
48. ROI Fallacy 3 – Automatically Assuming
Additional Patients Are a Financial Plus
for the Organization.....................................................198
Bonus Material – A Better Way to Present
ROI Projections........................................................ 200
Contents ◾ xiii
49. Confusing Average Hospital Cost Per

Day and Marginal Cost Per Day ..................................205
50. Not Realizing That, Even If You Can
Demonstrate a Clear ROI, the Hospital
May Still Not Move Forward ........................................208
13 Other Financial Pitfalls ....................................... 211
51. Projecting Overly Rosy and/or Simplistic
Sales Numbers.............................................................. 211
52. Triggering Financial Thresholds for Budget
Limits, Board Approval, and/or Other Fiduciary
Requirements................................................................213
53. Triggering Additional Insurance
Requirements, Plus Possibly Having
to Name the Health System a Benefciary................... 214
⭆ 54. Not Fully Understanding Overall
Top 10
Financial Incentives...................................................... 215
⭆ 55. Not Appreciating the Misaligned
Top 10
Financial Incentives between the Environment
Asking for Greater Care Coordination
Utilizing the Lowest Acuity Interventions
Possible and Most Payers Reimbursing
on a Fee-for-Service Basis............................................ 217
56. Not Knowing the Specifc Payment Rules................. 219
57. Offering a Project with Negative
Implications on the Workforce or Other
Operational Areas ........................................................220
58. Potentially Squeezing Some Providers
Out of the Revenue Stream..........................................222
59. Experiencing One or More of Four
Situations That Handcuff a Potential
Customer.......................................................................226
60. Failing to Offer an Adequate Tiered Structure
in Your Pricing Schedule .............................................228
61. Failing to Offer Flexibility in Your
Payment Structure ........................................................236
End Notes .........................................................................237
xiv ◾ Contents
14 Legal and Regulatory Pitfalls ..............................239

62. Shooting Yourself in the Foot
by Insisting on Overly Restrictive
Non-Disclosure Agreements ........................................239
63. Assuming That Having Access
to Additional Data Is Always a Plus ............................240
64. Having to Comply with Strict Regulations
Regarding Selling to Physicians
and Other Clinicians ....................................................242
65. Not Fully Understanding Human Research
Protection Protocol Requirements/FDA
Regulations/Certifcate of Need
Triggers/Licensure Regulations....................................243
End Note ..........................................................................244
15 External Political Pitfalls.....................................245

66. Possibly Running Afoul of Hyper-Vigilant
Privacy Advocates ........................................................245
67. Selling a Product That Requires Hospitals
to Share Data with Others ...........................................248
16 Internal Political Pitfalls ..................................... 251

⭆ 68. Playing into Professional
Top 10
Rivalries ........................................................................ 251
⭆ 69. Threatening Someone’s Job or Stature
Top 10
within the Organization...............................................253
70. Finding the Wrong Internal Champion .....................256
71. Failing to Get Strong Physician Buy-In
Right from the Start on a Clinically
Related Project..............................................................257
72. Creating an Internal “Enemy” Whose Mission
in Life Becomes to Prevent Your Success ...................259
73. Losing a Sale Because an Incumbent
Vendor Claims They Can Do the Same
Thing, or Your Innovative Approach
Teaches Them How to Do It Themselves ...................262
Contents ◾ xv
74. Losing Out Because the Organization

Prefers a Single Source Vendor....................................265
75. Facing a Very Cautious Decision-Maker
or Purchasing Agent Who May Be
“Technophobic” or Prefers a “Safe”
Option over an Untested, Innovative
One ...............................................................................266
End Notes .........................................................................269
17 Organizational/Operational Pitfalls ....................271
⭆ 76. Not Recognizing the High Threshold
Top 10
Required for Decisions and Action due
to Organizational Complexities ...................................271
⭆ 77. Underestimating the Complexity
Top 10
of Streamlining a Process or Changing
Procedures, Especially If It Creates
Additional Workload Requirements
for Some Departments or Individuals .........................273
78. Trying to Sell to a Hospital That Insists
on Having All Technology Products or
Services Referred to IT (Even If It Isn’t
Directly Related to IT), Resulting in the
Project Being Buried under Multiple
Other IT Priorities ........................................................276
79. Having to Comply with a Hospital’s
Requirement That All Vendors Subscribe
to a Vendor Clearinghouse before It Will
Allow a Presentation ....................................................277
80. Encountering an Organization That
Prefers to Develop Its Own Technology
In-House Instead of Seeking Outside
Solutions .......................................................................278
81. Encountering Internal End-Users’
“Bandwidth” Issues ..................................................... 280
82. Encountering Patients’ “Bandwidth”
Limitations ....................................................................282
xvi ◾ Contents
83. Suffering Because of Sub-Optimal

Implementation of Previous Technologies,
Leading to General Skepticism about
Technology or, If the Prior Technology
Is from Your Own Company, Your Reduced
Credibility Which Undercuts Renewals,
Cross-Sell Opportunities and Strong
References.....................................................................283
84. Encountering Things Beyond
Your Control .................................................................285
End Notes .........................................................................286
Final Thoughts................................................................... 287

Index ..........................................................................289
Acknowledgments
This book has been greatly improved through the generous

involvement of the following people: Liza Behles, Ed Bonn,
O.J. Booker, Marie Cameron, Jay Dennard, Nancy Desmond,
Cathy Dougherty, Lance Duke, Will ElLaissi, Matt Ethington,
Larry Emmelhainz, Kay Floyd, Wes Foote, Jerry Fulks, Andy
Goodwin, Rosty Gore, Stephanie Gore, Liz Hansen, Dr. Denise
Hines, Bill Jacobsen, Pete Kane, Doug Keir, Michael Lank,
Michael Levy, Russ Lipari, Dr. Robert Lubitz, Dr. Dominic Mack,
Stephanie Meier, Jason Miller, Bill Moore, Dr. Mike Mull, Erich
Murrell, Chuck Orrick, Andy Pearson, Joel Pieper, Bill Radler,
Kathy Reep, Brian Regan, Hal Robbins, Chris Rohrbach,
Greg Schaack, Dr. Ray Snead, Aron Starosta, Carie Summers,
Rob Vachon, Dr. Nizar Wehbi, Jeff Whitten, and Tiffany
Wilson.
xvii
About the Author
Glenn Pearson has worked in the hospital industry for more

than 35 years and now, as Principal of Pearson Health Tech
Insights, LLC (PHTI), applies his vast experience to bridge the
gap between the healthcare feld and emerging, disruptive,
and transformational technologies.
Before founding PHTI, Glenn was Executive Vice President
at Georgia Hospital Association for 19+ years where he led:
◾ Finance
◾ Data
◾ IT
◾ mHealth
◾ Public relations
◾ Communications
◾ Entrepreneurial ventures
◾ Vendor endorsements
For three years, Glenn served as elected American College

of Healthcare Executives (ACHE) Regent for Georgia,
representing the state’s 1,500 affliates to the international
association. In addition to chairing or being on six ACHE
committees, he also chaired and/or served on many other
xix
xx ◾ About the Author
national, regional, statewide, and local boards, committees and

organizations including:
◾ Association of Healthcare Enterprises

◾ Allied Association of Hospital Accountants
◾ The Center for Health Transformation
◾ Southern HIPAA Administrative Regional Process
◾ Technology Association of Georgia Health Society
◾ Georgia Department of Community Health
◾ Georgia State University Institute of Health Administration
◾ Leadership Atlanta
He was also the founding president of what is now the

Georgia Health Information Network and, in addition to
chairing the Financial Sustainability Committee, continues to
serve on its executive committee and as treasurer.
Glenn graduated magna cum laude and with honors from
the Syracuse University Honors Program and was elected to
Phi Beta Kappa and Phi Kappa Phi international honor soci-
eties. He went on to earn a Master of Health Administration
degree from the Ohio State University where he received the
Faculty Award for Outstanding Scholarship.
Outside the work environment, Glenn is a professional
blues/bluegrass/rock harmonica player who has performed
in nearly 1,000 events on fve continents and has a number
of recording projects to his credit. He also actively mentors a
number of younger men both professionally and personally
and is a cycling and ftness enthusiast.
He can be reached at: glenn@pearsonhti.com
See also www.PearsonHTI.com
Introduction
At 18% of GDP, healthcare represents a hugely attractive

market for suppliers and vendors. Any sector this enormous
requires support from dozens of entities: legal services orga-
nizations, design and construction companies, pharmaceutical
suppliers, utilities companies, information technology vendors,
food services suppliers, consulting frms, medical equipment
manufacturers, and many others.
However, just having a great product or service is no guaran-
tee of success. The selling organization must know how to fne-
tune its offerings to match providers’ operational preferences,
present a bold case for how their product will be advantageous
to the purchaser, and effectively communicate with potential
customers. The right product is a must, but it’s not enough.
To recast a well-known phrase: “If you build it, they might
not come.”
People from outside the healthcare industry attempting to
sell to hospitals, physicians, and other providers can achieve
great success, but they often get sidelined if they don’t know
the sector’s unique protocols, clinical requirements, fnancial
dynamics, and operating procedures. Even seasoned veterans
sometimes stumble over an unexpected speedbump. Thriving
in the Healthcare Market: Strategies from an Industry-Insider
for Selling Your Product provides specifc and actionable
insights into problems faced by those offering products and
services to the healthcare world.
xxi
xxii ◾ Introduction
Why This Book?

I’ve always been a “bridging” person, able to understand
where different people are coming from and communicating
the needs of one sector to others. Thriving in the Healthcare
Market: Strategies from an Industry-Insider for Selling Your
Product draws on my 35 years of experience working within
the hospital industry. Most of my activities have been in
“mainstream” executive leadership, but I have always had a
special appreciation for technology as a possible source of
new ideas to breathe innovation into some of the traditional
ways we do business. Over the years, I have been instrumen-
tal in helping open doors for numerous healthtech initiatives.
This book taps into my love for bridging the gap between
healthcare executives and the technology world.
Thriving in the Healthcare Market: Strategies from an
Industry-Insider for Selling Your Product presents 84 pitfalls
I’ve personally observed and, in some cases, personally fallen
victim to. These are not theoretical problems. Every one of
them has bitten more than one entrepreneur, and my objective
in this book is to point them out to help you minimize their
impact or, even better, avoid them entirely whenever possible.
The Sources
This book blends three experience streams:
1. My 35 Years as a Healthcare Executive

Right out of graduate school, I did a two-year administrative
fellowship at Michigan Medicine: University of Michigan where
I spent one year working for the medical center CEO and the
second year assisting the medical school dean. This was fol-
lowed by four years in the planning department of an acute
care hospital in the Midwest. Those six years gave me a deep
Introduction ◾ xxiii
understanding of the inner workings of large healthcare orga-

nizations and physician groups and provided several anec-
dotes that made their ways into this book. For the next fve
years, I worked at a regional hospital association in western
Michigan focusing largely on data projects and the relationship
between the business community and hospitals.
In 1995, I moved to Atlanta to become Executive Vice
President at Georgia Hospital Association (GHA) where I led
the following areas for the next 19+ years:
◾ Finance
◾ Data
◾ IT
◾ mHealth
◾ Public relations
◾ Communications
◾ Entrepreneurial ventures
◾ Vendor endorsements
The mainstream focus of my job was policy, fnance, data, and

communications, but a small part of my efforts at both GHA
and the hospital association in Michigan involved evaluating
and working with companies that wanted to become endorsed
vendor partners. This interaction brought me face-to-face with
hundreds of organizations where I observed what some of
them did really well and where others were lacking.
Additionally, over my career at the two hospital associa-
tions, I established a number of successful entrepreneurial
programs. I personally developed 100% of two data pro-
grams in the Midwest, taking them from identifying the
opportunity to:
◾ Fleshing out the concept

◾ Aligning the resources
◾ Designing the offerings
◾ Determining the pricing
xxiv ◾ Introduction
◾ Developing the marketing strategy

◾ Selling the products
◾ Actually operating the programs
◾ Helping users receive maximum value from the reports
At GHA, I also led teams that designed major offerings

around:
◾ Health Insurance Portability and Accountability Act

(HIPAA) legal compliance
◾ Helping hospitals assess, within the limits of antitrust
regulations, the levels of their payments from managed
care plans by specifc product lines in light of what others
in the market were being paid
◾ Completely reformulating our statewide discharge data
program by bringing it in-house instead of continuing to
outsource it
◾ Y2K preparation through a nationwide, technology-
delivered educational series that was endorsed by the
American Hospital Association and 41 state hospital
associations
Each of these was a big success both in terms of addressing

member hospital needs and generating additional revenue for
GHA. Lest I create the impression that we did everything right,
though, I must tell you that we attempted a few other products
that didn’t make it.
The reason I mention these entrepreneurial ventures is to
let you know I thoroughly understand how complex it is to
take a product from concept to success. And I also know the
exhilaration of success and the heartbreak of seeing some-
thing wither away. Sometimes the most important lessons
come through failure.
So, all these efforts have informed my understanding of
how to succeed in selling into the healthcare marketplace.
Introduction ◾ xxv
2. My Experience as a Consultant
Through my company Pearson Health Tech Insights, LLC, I help
entrepreneurs and others entering the healthcare market create
their strategies for product development, pricing approaches,
communications strategies, message formulation, and navigation
through health system politics. When I frst began my consult-
ing business, I decided to write down the pitfalls I had seen
plague vendors throughout my career. That frst list consisted
of 14 items, and as I worked with my clients over the years and
heard their tales of woe, I both recalled other pitfalls I hadn’t
previously written down and learned about some new ones my
clients faced. The list now contains 84 pitfalls, all of which are
addressed in this book.
3. Supplemental Insights from Leading

Healthcare Experts
One of the blessings of having a long career is knowing hun-
dreds of wonderful, talented healthcare people all over the
country. As I was getting close to bringing this book in for a
landing, I reached out to many colleagues in various subsections
of the healthcare world asking them to provide a “reality check”
for my observations and recommendations. They generously
offered their time, and their input both validated my conclusions
and offered truly helpful supplemental thoughts, examples, and
anecdotes that really help bring life to many of the principles in
the book. These ideas have translated some of the pitfalls from
theoretical possibilities to 3D examples of what can go wrong,
adding a tremendously helpful “edge” to the book.
Among my reviewers are healthcare CEOs, CFOs, COOs,
CIOs, physicians, an innovation center director and his
staff, a healthcare think tank leader, hospital association
executives, healthcare consultants, an insurance benefts
consultant, graduate school professors, and healthcare sales
executives. Having this diverse group weigh in provides
xxvi ◾ Introduction
additional assurance that these are reality-tested recommen-

dations. I’m thankful for my reviewers.
Who This Book Is For

Although this material emphasizes healthtech, it’s really
applicable for anyone who interacts professionally with the
healthcare world. This group includes:
◾ Technology innovators and entrepreneurs

◾ Companies in verticals other than healthcare with
viable tech products that can be adapted to healthcare
applications
◾ International healthtech companies that would like to
bring their products to the US market
◾ Established companies (sales or otherwise) already oper-
ating in the healthcare world
◾ Healthtech incubators and accelerators
◾ Investors either:
– Considering supporting new healthtech product so they
know what questions to ask to make sure end users will
really buy the products they are considering funding, or
– Looking to improve the performances of companies in
which they have already invested
◾ Employees within healthcare organizations who under-
stand the transformational potential of technology and
who could beneft from strategic advice on how to get
others within their organizations onboard
◾ Students and anyone else entering one of the healthcare
delivery professions as executives, physicians, nurses,
therapists, etc.
Although the recommendations in this book are addressed to

the frst four categories, the insights gained are applicable to
all eight groups.
Introduction ◾ xxvii
How the Book Is Organized

The bulk of the book describes 84 things I’ve personally seen
go wrong for people interacting with the healthcare universe.
However, in order to provide context for these pitfalls, I inserted
four preliminary chapters that provide insights into the health-
care feld’s unique operating environment, which is sometimes
dysfunctional. Some of what we do either doesn’t make sense
or is sub-optimal. But I believe that rational people respond
rationally to the settings in which they operate, even if they are
not rational. So, there are reasons – many of them even good –
for why we do some of the surprising things we do. Chapters 1
and 2 delve into a few of the more pressing problems.
But rather than just complain with no ideas for improve-
ment, I want to present some common-sense suggestions
based on my decades of observing and being part of the
system. I’ve always said if you want to change the out-
comes, change the inputs and incentives you offer. Chapter 3
describes three ideas that could fundamentally solve some of
the most vexing problems in our healthcare system.
Since one of this book’s primary targets is the healthtech sec-
tor, I devoted Chapter 4 to describing and analyzing the many
promising possibilities technology offers. So much of what we do
in healthcare amounts to rearranging the chaos, but healthtech
affords the opportunity to truly improve patient care, increase
effciency, and maximize cost-effectiveness. So, this chapter points
toward a future made brighter because of the efforts of people –
like many of my readers – devoting themselves to using technol-
ogy to bring about clinical and operational breakthroughs.
Reading Plan
There are several ways you can read this book. Of course,
every author thinks every single word he writes is worth read-
ing. So, one way to read this book is from cover to cover. This
xxviii ◾ Introduction
may not be reasonable for leaders with jam-packed schedules,

so you might try one of these approaches instead:
◾ Regardless of how much time you have, everyone should

read Chapter 1 – “The Jacked-Up World of Healthcare
Financing.” Finances drive everything in every industry,
and this chapter is a “must” if you want to understand the
world you are relating to.
◾ Read the key pitfalls chapters next – The three areas
with the greatest potential for scuttling any change initia-
tive are fnancial (who stands to gain or lose fnancially),
relational (how the change personally affects the people
involved), and operational (what systems or ways of doing
things must change). Therefore, if you are tight on time,
I suggest you start with the following chapters:
– Chapter 12 – “Return on Investment Pitfalls”
– Chapter 13 – “Other Financial Pitfalls”
– Chapter 16 – “Internal Political Pitfalls”
– Chapter 17 – “Organizational/Operational Pitfalls”
◾ Alternatively, you can start with the “Top 10” pitfalls – As I
indicated, I’ve identifed 84 different things that can derail
a new initiative. Sometimes, all it takes is one, and it can
be any one of the 84. So, they’re all important. However,
there are some that are far more common or serious than
others. As you read through the book, you will notice the
following icon: Top⭆ . This icon identifes that pitfall is one
10
of the Top 10. If you want to dive into the greatest threats
frst, start with the ten pitfalls I consider having the highest
likelihood of creating problems for you:
⭆ 28. Introducing System Security and/or Privacy

Top 10
Vulnerabilities
⭆ 33. Not Being Able to “Break Through the Clutter”
Top 10
and Even Get a Hearing
Introduction ◾ xxix
⭆ 45. Thinking a Healthcare Organization Will Embrace

Top 10
Your Product or Service Even If You Don’t Have a
Clear, Demonstrable ROI
⭆ 46. ROI Fallacy 1 - Not Realizing How Diffcult It Is to
Top 10
Actually Capture Potential Savings
⭆ 54. Not Fully Understanding Overall Financial
Top 10
Incentives
⭆ 55. Not Appreciating the Misaligned Financial
Top 10
Incentives between the Environment Asking for
Greater Care Coordination Utilizing the Lowest Acuity
Interventions Possible and Most Payers Reimbursing
on a Fee-for-Service Basis
⭆ 68. Playing into Professional Rivalries
Top 10
⭆ 69. Threatening Someone’s Job or Stature within the

Top 10
Organization
⭆ 76. Not Recognizing the High Threshold Required for
Top 10
Decisions and Action due to Organizational
Complexities
⭆ 77. Underestimating the Complexity of Streamlining a
Top 10
Process or Changing Procedures, Especially If It
Creates Additional Workload Requirements for Some
Departments or Individuals
A Disclaimer
I believe one of this book’s strengths is its extensive inclusion
of real-life examples drawn from my experience in the hospi-
tal industry and with my clients. Some of these examples are
positive, and others, not so much. Whenever authors include
real-life examples, they run the risk of embarrassing some of
xxx ◾ Introduction
their subjects. In order to avoid this, I am following the stan-

dard practice of announcing that I have changed – sometimes
substantially – the details of many of my stories to protect the
privacy of those involved.
A Final Thought on My Perspective

Although I am an industry-insider, I am not a blind cheer-
leader for hospitals or the rest of the healthcare delivery
system. I know the fat spots as well as the next person.
However, I have a deep appreciation for the dedication of
the thousands of fne people working in this feld, and my
complaints are probably more akin to a family quarrel than
to someone lobbing grenades from the sidelines. I try to be
honest but kind in my comments, and I have done my best
to avoid joining the “blame game,” pitting different parts of
the industry – hospitals, physicians, insurance companies,
etc. – against each other. I also avoid making overtly political
statements. The purpose of this book is to equip you to maxi-
mize your interactions with the healthcare system, not raise a
clenched fst over everything that is wrong with it.
May this book assist you as you devote yourself to helping
the healthcare delivery world more effectively serve its patients
and do their best to restore them to full health.
Chapter 1
The Jacked-Up World

of Healthcare Financing
Every industry has its quirks. Healthcare may be among the

quirkiest. And perhaps the most complicated. Far from being
a fairly cohesive industry like retail sales or manufacturing, the
healthcare world is made up of overlapping types of service
providers, occasionally coordinated but usually not. The two
most infuential groups are physicians and hospitals.
Physicians
Physicians provide the backbone of medical care and are the
primary drivers of the diagnostic and caregiving decisions and
processes. Although healthcare information and/or interventions
for less serious conditions are available through public health
centers, pharmacies, nurse helplines, and other places, physicians
determine the treatment path for the most serious medical issues.
They’re the only ones who can admit a patient to the hospital and
approve their discharge, they determine the care decisions during
an inpatient stay, and they set the course for post-discharge care.
Nothing happens unless a physician writes an order.
1
2 ◾ Thriving in the Healthcare Market
About one-third of the nearly 625,000 US physicians who

spend the majority of their time in direct patient care are pri-
mary care doctors: family physicians, general practitioners, inter-
nists, pediatricians, obstetricians/gynecologists, and geriatricians.
The rest are specialists and sub-specialists. Primary care physi-
cians generate 51.8% of all offce visits.1 The fact that this one-
third of the physicians is responsible for half the visits makes
sense. Many offce visits are for relatively less severe conditions
and are appropriately treated by primary care doctors.
Historically, most physicians worked either alone or in
relatively small group practices. Over the last few decades,
though, more and more individual doctors and groups have
joined together to form larger entities, or they have been
acquired by hospitals. The days of the small-town family
doctor in solo practice are quickly fading.
Hospitals
Hospitals are the other major factor in the healthcare ecosys-
tem. According to the American Hospital Association, there
were 6,210 hospitals in the United States in 2017.2 Hospitals are
either not-for-proft, governmental entities, or investor-owned.
Most are general “community” hospitals while others are consid-
ered Academic Medical Centers (AMCs), which combine patient
care services, medical education, and academic research. Other
hospitals focus on care for selected groups like children or for
specifc clinical areas like cancer care, behavioral health, or
rehabilitation services. In the late 1990s, the federal government
established a new category of small, rural hospitals designated
as Critical Access Hospitals (CAHs), which are limited-service
institutions with 25 or fewer beds. Because of the vital roles
they play in their communities, they beneft from slightly
enhanced payment terms to help keep them solvent.
People unfamiliar with the inner workings of a hospital can
underestimate their complexity. None other than management
The Jacked-Up World of Healthcare Financing ◾ 3
expert Peter Drucker has called hospitals “the most complex

human organization ever devised.”3
Perhaps hospitals’ most signifcant oddity is the fact that
historically the people who run the enterprise rarely control
what happens within the organization. Typically, a company’s
top executive has great authority to control the transactions
that affect its core business. Although hospital leaders can set
policies that infuence doctors’ decisions in a general way, the
fnal determination about each individual patient rests solely
with the physicians. They decide who will be admitted. They
decide what tests and procedures will be done. They decide
when a patient can be discharged. Every one of these choices
carries operational and fnancial implications for the hospital,
and they are made by people who are not always employed
by the organization.
Some analysts have likened a hospital to an airport.
Airports exist because planes need a place from which to
operate and because passengers need a place to connect
with the airlines. Each airline is an independent organization
that contracts with the airport for various services. Although
the airport sets certain broad policies, it doesn’t control the
airlines’ specifc internal operations or activities. Each airline
company sets its own human resources rules, work require-
ments, investment strategies, etc. All this is very parallel to the
traditional relationship between hospitals and physicians. The
hospital “sets the table,” but the physician provides the meal.
However, this semi-independent relationship is beginning
to change. In recent years, insurance companies – including
the governmental Medicare and Medicaid programs – have
encouraged greater coordination among hospitals, physicians,
rehab facilities, and other providers. Rather than paying each
provider separately and for each individual service they deliver
to a patient, they are moving toward a more coordinated sin-
gle payment where the provider organizations assume increas-
ing fnancial risk. These new fnancial incentives foster more
resource alignment.
One way this happens is through a single bundled pay-

ment to an entity such as an Accountable Care Organization
(ACO) that assumes clinical and fnancial responsibility for a
patient’s episode of care. The ACO either owns the necessary
resources or contracts with others to access them. A related
concept is value-based payment where patients are encour-
aged to use services that can demonstrate superior and cost-
effcient care. The best way to achieve these goals is through
greater coordination among all the organizations providing
care. And many hospitals have concluded that the best way to
manage care is through owning the “assets,” in this case phy-
sician practices. As a result, many hospitals have purchased
practices or have developed stronger contractual relationships
with them.
Although this movement toward bundled payments or
value-based care has been growing, the vast majority of
healthcare is still paid on a piecemeal, fee-for-service basis
where every time a physician or hospital provides a ser-
vice, they get paid for that specifc intervention. Typically,
procedural-based activities (i.e., “doing something” for a
patient like replacing a hip) are more lucrative that the medi-
cally based ones (such as hospitalizing a patient while they
recover from pneumonia). A 2018 survey of health system
executives reveals that 78% of care is still covered under a
fee-for-service arrangement. However, the remaining 22% that
is paid under some kind of value-based care arrangement is
growing and is expected to rise to 25% in 2019.4
The Three-Legged Stool

One of the keys to understanding the operating dynamics
within the healthcare industry is recognizing that it is like a
three-legged stool where all three legs are equally important
and must be kept in balance. The three legs of the health-
care delivery stool are access (both geographic and fnancial),
quality, and cost. It’s easy to get two of these right but very
tough to keep all three in perfect balance.
◾ A given region may generally offer high-quality, afford-

able care for most things but may have an undersupply of
certain medical specialists or other services. This can be
especially problematic in rural or impoverished areas.
◾ Affordable care may be within a patient’s reach, but if it’s
of poor quality, people will avoid it unless they have no
other choice.
◾ Patients may have physical access to great quality care
but if they can’t afford it – either because they don’t have
insurance coverage or because they can’t pay for it out of
their own pockets – it does them no good. Also, a health-
care industry whose costs continue to spiral out of control
is unsustainable in the long run.
So, this is the challenge to the healthcare feld: fguring out a

way to keep these three needs in equilibrium.
Now let’s take a more detailed look at the inner workings
of healthcare fnancing.
How Healthcare Is Paid For

Because of the extensive debate leading up to passage
of the Affordable Care Act of 2010 (ACA – also known as
Obamacare), most Americans realize that we are about the
only major “frst world” nation that does not provide universal
healthcare coverage for our citizens. Many countries offer a
single-payer system where the government operates a publicly
funded insurance plan. In some cases they also own the hos-
pitals and employee all personnel.
By contrast, the United States has a patchwork of public
and private insurance programs. Figure 1.1 shows the percent-
age of the US population covered under various insurance
arrangements as reported by the Kaiser Family Foundation.5
Figure 1.1 Health Insurance Coverage of the US Total Population – 2017.

Source: Kaiser Family Foundation
Forty-nine percent of the population is enrolled in private

commercial insurance programs. The public programs cover
36% of the total, broken down as follows:
◾ Medicaid (the program for low-income individuals)/

Children’s Health Insurance Program (the program for
low-income children) – collectively 21%
◾ Medicare (the program for the elderly) – 14%
◾ Other public programs – 1%
Let’s look at how well the major public programs (Medicaid

and Medicare) cover the cost of care for their enrollees. Before
we do so, however, I would like to comment on the different
ways healthcare population, utilization, and economic statis-
tics are presented. Readers are often confused when they see
various statistics, studies, articles, or news stories that show
conficting numbers.
First of all, each type of insurance program’s percentage of
the market varies depending on what data is being reported:
◾ Percentage of the population enrolled in each type of

coverage – This is what is presented in Figure 1.1.
◾ Percentage of hospital admissions – Since Medicare

patients are almost exclusively elderly and older people
are admitted more frequently, they tend to account for a
far greater percentage of hospital admissions than their
proportional representation in the population.
◾ Percentage of days patient spend in the hospital – Similarly,
Medicare patients represent a greater proportion of hospital
days than their percentage of the population, both because
they tend to be admitted more frequently and because they
also tend to stay longer than younger patients.
◾ Percentage of revenue – Again, Medicare tends to be over-
represented for the reasons stated above. As an example,
in the state of Georgia, Medicare patients were only 12%
of the 2016 state’s population but represented 42% of 2016
hospital revenue. Conversely, during that same year, those
with no insurance made up 12% of the state’s population
but only contributed 3% of total hospital revenue.6 This
also makes sense because, by defnition, they have no
insurance, and many of them are unable to pay their bills.
Just as it’s important to clarify which statistic – population

coverage, admissions, patient days, or revenue – is being
reported, we should also clearly defne various aspects of hos-
pital fnancial condition and performance. There are several
different measures, and results range wildly, depending on
which number is being reported:
◾ Total margin – This represents excess of revenue over

expenses (or profts) for the entire corporate entity.
Included here are margins from:
– Inpatient care
– Outpatient care
– Owned nursing homes
– Other medical services – durable medical equipment,
home health services, retail pharmacies, and all other
related clinical services
– Other non-clinical offerings – real estate, gift shops,

parking, and any other type of business
– Investment income
– Any other sources
Within any given year, some of these are proftable
while others may lose money. The total margin rolls all
these together to show a single bottom line income.
◾ Patient care margin – This reports only the profts from
direct patient care.
◾ Inpatient margin – As the name implies, this refects
only activities for inpatient services. Over the last few
decades, more and more care is being shifted to outpa-
tient settings, so although it’s still central to a hospital’s
fnancial results, this number is becoming slightly less
relevant than it was in the past. In fact, a recent Modern
Healthcare article reports that hospital revenue from
outpatient care is catching up to revenue from inpa-
tient care and may soon surpass it. In 2017, outpatient
services accounted for 48.7% of all patient care rev-
enue.7 Just reporting margin from inpatient activity only
tells part of the story and leaves off the increasingly
important outpatient activity and all the other services
included under total margin.
◾ Margins from individual sources of payment:
– Medicare – This can be further confused by which
Medicare services are being reported: all Medicare
services or just inpatient, just outpatient, just other
service areas, or some combination of all the above.
Results obviously differ depending on what is being
measured.
– Medicaid – This number can be tricky too. In addi-
tion to the issues of whether just inpatient or if both
inpatient and outpatient results are included, some
reports fold in activity related to the Children’s Health
Insurance Program (CHIP). Furthermore, there are
some supplemental payment programs such as the

Disproportionate Share Hospital Program (DSH) that
pay hospitals beyond the direct Medicaid payments.
DSH and other supplemental payment fgures are
sometimes rolled into Medicaid numbers, raising the
reported Medicaid margin.
– Other government sources such as the Veteran’s
Administration or the Tri-Care program for military
families.
– Private insurance including Anthem, UnitedHealthcare,
Aetna, and dozens of others.
So, it’s important to read reports very carefully to understand

exactly which set of statistics they are using. Depending on the
data source, different sectors of the healthcare world can appear
to either be ready to crash and burn or be doing fairly well.
Now, let’s look at the economic realities of the various
payer categories.
Medicaid
The Medicaid program covers certain children, pregnant
woman, senior adults, and people with disabilities who are
designated as low-income. Medicaid is jointly funded by the
federal government and individual state governments. The
national Centers for Medicare and Medicaid Services (CMS)
sets certain broad national coverage requirements, and then
each state can set up its own program that meets the neces-
sary coverage, adding additional services if they wish.
Through a provision called the Federal Medical Assistance
Percentage (FMAP), the federal government matches at least
one-for-one each dollar a state spends on Medicaid. This is the
minimum match, and, depending on the services provided and
the populations served, the FMAP can be considerably higher.
One of the provisions of the ACA was a guarantee that, for

the frst few years, the federal government would pay 100%
of the costs of Medicaid recipients newly enrolled through the
expansion of the state’s Medicaid program. (Already-enrolled
patients remained under that state’s original FMAP formula.)
After the frst few years of Medicaid expansion under the ACA,
the federal ACA match started phasing down and will stabilize
at 90% in 2020 and thereafter.8 Since Medicaid expansion was
deemed optional by the Supreme Court, several states declined,
stating they were concerned about their long-term ability to
match the 10% requirement once the 100% federal coverage
wound down. Some critics of this position likened it to refusing
to let someone buy you dinner if you have to pick up the tip.
A program that is related to Medicaid is the Children’s
Health Insurance Plan (CHIP), which expands coverage to
additional children from low-income families. As shown in
Figure 1.1, Medicaid and CHIP cover 14% of the nation’s
population.9
Unfortunately, Medicaid rarely covers the full cost of care.
According to the American Hospital Association, hospitals
in 2017 received on average only 87% of what they actually
spent – not what they charged or what they wanted to get,
but what they actually spent – caring for Medicaid patients.
Although some hospitals did have their costs covered or even
earned a proft from Medicaid, 62% lost money.10
This Medicaid net loss situation has not always been the
case. Between 1990 and 1997, every state Medicaid pro-
gram was obligated to operate under a congressionally man-
dated policy called the Boren Amendment, named after the
Oklahoma senator who sponsored it. Essentially, the Boren
Amendment required each state’s Medicaid program to, in
the aggregate, pay the cost incurred in caring for Medicaid
patients by “effcient and economically operated facilities.”11
This didn’t guarantee that every hospital and nursing home
would break even, but the concept was that if you added
up the amount every Medicaid provider in the state spent
caring for Medicaid patients, it would equal the total amount

Medicaid paid them.
From a budgetary standpoint, Medicaid is often seen as a
bottomless pit. It is a huge line item in both the federal budget
and every state’s budget. And since healthcare infation has
exceeded the general infation rate for many years, elected
offcials are alarmed about the long-term implications of this
trend. They are always on the lookout for ways to rein in what
some see as out-of-control spending.
In 1997, Congress passed a sweeping piece of legislation
called the Balanced Budget Act (BBA) which had a huge impact
on the way healthcare was paid for. One of its provisions was
repealing the Boren Amendment, thus removing the require-
ment that each state’s Medicaid program fully covers its costs.
I was Executive Vice President at Georgia Hospital
Association (GHA) during the time the BBA was being
debated. I remember commenting to some of my colleagues
that if we lost the Boren Amendment, that could spell the
beginning of the end for hospitals’ long-term fnancial viability.
We did lose it, and my observation may have been prophetic.
As we have seen, rather than paying 100% of costs, Medicaid
now only pays 87%. And these shortfalls have proven to be a
signifcant drag on hospital fnances.
While at GHA, I often spoke to various community and
civic groups on the status of the state’s healthcare industry.
Like any speaker, I try to think of ways to help my audiences
emotionally relate to my points, and I came up with this
scenario that explains what hospitals are up against when it
comes to Medicaid payments.
“Suppose,” I would say, “you are the owner of a road con-
struction company, and the State of Georgia and the federal
government come to you and explain that Interstate 75, which
runs north-to-south through the state, needs to be repaved.
Since yours is a Georgia-based company, they would like you
to take this on. In fact, since you are based in the state, they
decided you are required to do so. And, the government will
even pay you 87% of what you spend to complete the job.
How many of you would jump at this opportunity?”
Of course, no fscally responsible person would do cart-
wheels over these terms. Yet, this scenario pretty closely
approximates hospitals’ deal with Medicaid. And since Medicaid
represents a signifcant proportion of each state’s population,
the underpayments add considerable fnancial stress.
As a reminder, Figure 1.1 shows that 14% of the population
nationally is covered under Medicaid. However, this level can
be much higher. In fact, fully 31% of New Mexico’s popula-
tion is covered by Medicaid.12 And if the statewide average in
New Mexico is 31%, there are undoubtedly some hospitals that
approach the mid-30% level or even higher. Obviously, with a
shortfall for every Medicaid patient on average, the higher the
Medicaid volume, the greater the fnancial burden. Greater-
than-average Medicaid volumes are typical for inner city and
rural facilities, and as we will see below, these hospitals are
under enormous fnancial stress.
Hospitals in Georgia also face a quirky payment system for
outpatient Medicaid care that guarantees they will lose money.
In the early 2000s, because of funding challenges and as a
result of a budget cut, the state enacted a policy that limited
hospital outpatient payments to 85.6% of costs.
Under this policy, the Georgia Department of Community
Health (DCH) took its historical data on the level of payments
for outpatient care each hospital typically got and paid an
estimated amount to each hospital via installments throughout
the year. At the end of the year, the hospital submitted docu-
mentation on how much it actually spent caring for Medicaid
outpatients. DCH then calculated 85.6% of that amount. If
there was a shortfall in what the hospital should have been
paid, Medicaid cut a check to make up the difference. If the
hospital received more than 85.6%, the check went the other
way. For the record, the cost coverage amount was raised to
95.7% in 2010, but the principal remains the same. Hospitals
are guaranteed to lose money.
Think about that. There is absolutely no way under this

policy that the hospital can ever cover its Medicaid outpa-
tient costs. Many of the payment programs enacted by vari-
ous insurance programs (like Medicare, Blue Cross, and other
payers) have the stated objective of encouraging more effcient
care delivery. That’s impossible with this 85.6% (now 95.7%)
payment policy. If a Georgia hospital really streamlines its
operations and cuts its Medicaid outpatient costs by 10%,
guess what? Its payment also goes down 10%. No matter how
effcient it becomes it will always lose money taking care of
Medicaid outpatients. How messed up is that?
On the Medicaid physician side, according to a Forbes article
entitled “Why Many Physicians Are Reluctant to See Medicaid
Patients,” physicians are paid, on average, 61% of the Medicare
physician payment levels,13 which, as we will see, is not all
that great. Since physicians are not required to take Medicaid
patients, many opt out. And, because payments are so low,
even those who do take Medicaid sometimes limit how many
they accept. Patients often report major access issues, especially
when trying to locate super-specialists like pediatric surgeons.
Medicare
Medicare’s payments are generally considered better than are
Medicaid’s, but many – if not most – hospitals still lose money
caring for Medicare patients. The Medicare Payment Advisory
Commission (MedPAC) reports that 2017 overall Medicare
margin slipped to –9.9% down 0.2% from the previous year.14
Put another way, Medicare is only paying 90% of the total cost
of care. This would be like going into a car dealership with
documentation of what the dealer actually paid for the car you
ordered, and writing a check for 90% of that amount.
Unfortunately, Medicare losses have been growing and are
projected to continue to rise. A recent MedPAC action testifes
to the inadequacy of current Medicare payments. As it was
considering its Fiscal Year 2020 hospital payment adjustment,

the organization took the unusual step of recommending a
boost larger than the current policies require. That’s because
it was concerned that even high-quality hospitals were los-
ing money. MedPAC Executive Director Jim Matthews stated,
“When a hospital or provider is being effcient and still can’t
stay in the black in Medicare, that is cause for concern.”15
But hospitals’ fnancial wellbeing at the hands of the federal
government gets even worse. Recent years have seen several
additional cost-cutting initiatives that continue to chip away at
hospital payments. Besides inadequate Medicare and Medicaid
payments, hospitals face cuts from the following multi-year
legislative or regulatory items:
◾ Patient Protection and Affordable Care Act of 2010

◾ Budget Control Act of 2011
◾ Middle Class Tax Relief and Job Creation Act of 2012
◾ American Taxpayer Relief Act of 2012
◾ Bipartisan Budget Act of 2013
◾ Protecting Access to Medicare Act of 2014
◾ Veterans COLA – 2014
◾ Medicare and CHIP Reauthorization Act of 2015
◾ Bipartisan Budget Agreement Act of 2015
◾ Bipartisan Budget Act of 2018
◾ Various CMS Regulatory Changes16
Each of them removes funding, and collectively they will

reduce hospital payments by billions and billions of dollars
between now and 2026.17
Let’s turn now to Medicare physician payments. Just how
well are doctors paid? The answer varies, depending on
which specialty you are considering. In general, all payers –
including Medicare – tend to pay specialists like cardiolo-
gists, oncologists, etc. better than they do primary care
physicians, like family physicians and internal medicine
physicians.
The following is an anecdote, and policy should be driven

by data and not anecdotes. However, this story typifes how
many physicians feel about Medicare payment levels. My pri-
mary care physician of about 15 years is a family practitioner.
We developed a good rapport, and because he knows I work
in healthcare, we often have fairly extensive conversations
about the state of the industry.
About ten years ago, he told me about an analysis his prac-
tice conducted. They used national average statistics regard-
ing physician productivity, primary care cost structure, and
Medicare payments and estimated per physician take-home
pay assuming their physicians:
◾ Saw the average number of patients a family practitioner

sees a day,
◾ Had the same cost structure as the average family medi-
cine practice, and
◾ Were paid only the amount that Medicare pays per visit
I thought that was an interesting and relevant question, and I was

surprised to hear their analysis estimated a physician’s take-home
pay under those assumptions at only about $40,000 per year. That’s
pretty shocking when you consider the many years of advanced
training physicians have, the huge debt loads many carry, and the
amount of liability they assume in caring for patients. Accounting
for infation, that take-home number would probably be closer to
$55,000 in today’s dollars, but that’s still terrible. Is it any wonder
physicians have mixed feelings about Medicare payments?
According to the Forbes article cited above, Medicaid
physician payments are only 61% of Medicare physician pay-
ments.18 If we apply this statistic to the take-home numbers
calculated by my primary care physician’s offce ($55,000), this
translates to something like $33,000 per year if they treated
only Medicaid patients and were only paid the Medicaid rates.
Clearly, no one would spend all those years necessary to
become a physician with this type of fnancial return.
The Uninsured
In the early 2000s, one of the factors that convinced the public
that we needed healthcare reform was alarm over the grow-
ing percentage of the population under 65 without healthcare
insurance. That momentum ultimately culminated in passage
of the ACA in 2010. The number of uninsured kept creeping
up through the early 2000s and reached its peak of 17.8% in
2010, the year the ACA passed. It declined over the next few
years and stood at 10.2% in 2017.19 Despite a marked improve-
ment, 10% of non-elderly population without health insurance
– 27.4 million people – is still high. So, even though the ACA
made a big dent in the number of uninsured, it only achieved a
43% reduction in the number of people who lacked coverage.
Most people without insurance have limited fnancial
resources, and many have major challenges paying large medi-
cal bills. Statistics are diffcult to access, but many hospital
fnancial experts estimate that the percentage of payment they
receive from the uninsured is roughly 25% of actual cost. If
this number is accurate, it means that hospitals must absorb
about 75% of what they spend caring for the uninsured.
The Need to Shift Costs

The above discussion describes the incredibly challenging
fnancial climate hospitals and physicians operate in. Often,
the economic numbers from the major public programs –
Medicaid and Medicare – and from the uninsured are pre-
sented in isolation from each other. Some news stories discuss
fnancial stress the uninsured place on hospitals. Others
present some of the diffculties created by Medicaid payment
shortfalls. But what happens when we try to get our arms
around the full range of the underpayment situation?
Let’s use the American Hospital Association number – 87%
– for Medicaid’s cost coverage. And let’s assume the Medicare
Figure 1.2 US Hospital Discharges by Payer – 2009.

Source: Becker’s Hospital CFO Report/National Hospital
Discharge Survey
cost coverage is about 90%, as reported by MedPAC. Just how

big a problem does this create?
As we have said, the percentage of discharges each hospital
gets from each payer type varies considerably depending on
its location, services offered, number and type of physicians,
and many other factors. Figure 1.2 shows the 2018 national
distribution of hospital discharges by source of payment.20
It shows that 40.9% of patients were covered by Medicare
and 17.2% were covered by Medicaid. An additional 4.9% had
no coverage.
The table below summarizes the combination of the per-
centages of patients covered by each source and the shortfalls
from each:
Percentage of Percentage
Payment Source Discharges (%) Loss (%)
Medicaid 17.2 13
Medicare 40.9 10
No insurance 4.9 75
The implications of this are staggering! On average, hospitals

are literally losing money on nearly two-thirds - 63% – of all their
patients. The best category is Medicare where they are “only” los-
ing 10%. In the case of the uninsured, they are losing about 75%.
To make matters worse, many rural hospitals and inner-city
hospitals have higher-than-average percentages of Medicare,
Medicaid, and uninsured patients. For some of those hospitals,
these three categories can add up to well over two-thirds or
more of their inpatients. I’m not aware of any other industry
sector where its members are expected to literally lose money
providing services to such a huge part of their client base.
Over the long haul, there are only two possible outcomes of
this type of fnancial arrangement. Hospitals can either:
1. Go out of business, or
2. Get someone else to make up the difference
Many have succumbed to option 1, and option 2 has resulted

in something called cost shifting. This is where commercially
covered patients end up paying considerably more – estimated
by some at about 30% – than would otherwise be necessary in
order to make up the shortfall from the public programs and
people without insurance. Cost shifting amounts to a hidden
tax on patients with commercial insurance and/or the compa-
nies that buy this insurance for their employees.
There is another dimension of cost shifting: using profts
from certain proftable service areas within the hospital to
cross-subsidize other ones that lose money. Historically, areas
like behavioral health, patient education, and post-acute care
have been fnancial drains on the income statement. The way
hospitals have been able to continue offering them is through
subsidizing them with profts from other areas like neuro-
surgery and interventional cardiology. However, the growing
fnancial pressures have forced some hospitals to curtail these
needed but unproftable services to the detriment of the com-
munities they serve.21
The Impact of These Dynamics on Hospitals

These Medicare and Medicaid shortfalls have put great fnancial
pressure on the delivery system with sometimes devastating
results. Many hospitals have been forced to close over the last
two decades, and many others have been severely weakened
by many consecutive years of fnancial loss. Recently, respected
healthcare consultant Paul Keckley commented, “About 18% of
the hospitals in the country are at or near insolvency.”22
Rural and inner-city hospitals have been particularly hard-
hit. The University of North Carolina’s Cecil G. Sheps Center
for Health Services Research reports that since 2010, 102 rural
hospitals have closed.23
The February 25, 2019 edition of Modern Healthcare ran a
story entitled, “Fewer independent hospitals can weather oper-
ating headwinds.” Here’s an excerpt:
More than half the nation’s stand-alone hospitals

(53.2%) have lost money on an operating basis for
each of the past fve years, which is more than twice
the share of system-owned hospitals (25.9%)… Rural
stand-alone hospitals are most at risk, with 60.5%
having lost money on an operating basis in each
of the past fve years, compared with 42% of their
urban counterparts.24
Just fve days earlier, Becker’s Hospital CFO Report highlighted

a Navigant study that predicted that 21% of the nation’s rural
hospitals are at risk of closure, and 64% of those hospitals
are considered essential to their communities.25 Losing them
would wreak havoc downstream.
Some people who think we probably have too many hos-
pital beds might not see these hospital closures as all bad. In
their minds, reducing the supply could lower overall health-
care expenditures. The problem with this view is that closures
are not planned out rationally. Instead they are haphazard, and
losing too many hospitals in the same geographical area can

create real access problems, thereby throwing the three-legged
stool off kilter.
Furthermore, hospitals are usually the largest employer in
small towns, and losing one often takes the whole community
down. Huffngton Post recently ran an extended story called,
“A Hospital Crisis Is Killing Rural Communities. This State Is
Ground Zero” that highlights the wreckage left in the wake of
the shuttering of three Georgia rural hospitals. After its hospital
closed in 2014, the town of Glenwood, Georgia was decimated
fnancially. The town’s mayor told Huffngton Post, “I tell folks
that move here, ‘This is a beautiful place to live, but you better
have brought money, because you can’t make any here.’”26
There is little doubt that the long-term impact of serious
underpayments to hospitals year after year stresses the pro-
vider system, results in unnecessarily infated premiums for
commercially insured patients, and can have a strongly nega-
tive trickle-down impact on some of the communities whose
hospitals disappear.
Earlier, I stated that various reports on hospitals’ fnancial
state are all over the place. The February 25, 2019 Modern
Healthcare article mentioned above that indicates how many
hospitals have lost money year after year and the Becker’s
story predicting one in fve rural hospitals closing seems at
odds with statistics from other sources. For example, data from
Modern Healthcare Metrics reports that total hospital margin
nationally in 2017 was 3.83%.27 That doesn’t seem too bad.
Most organizations can do just fne with that type of proft.
But remember that this is an average number. There is tre-
mendous variation among the results of the country’s 6,210
hospitals. As we saw, even though many have positive mar-
gins, many others operate in the red. In some cases, for many
years.
My intention in this book is to remain as politically neu-
tral as possible, but I feel compelled to point out the follow-
ing. The healthcare reform debate regularly includes various
versions of a single-payer system. The latest incarnation is

Medicare for All (M4A). The concept behind M4A is that every-
one would be covered by a single, federally operated health
program, thus essentially eliminating both Medicaid and the
private insurance industry. M4A would set payments for all
patients at the Medicare level,28 thereby replacing the Medicaid
13% shortfall and the uninsured 75% shortfall with the
Medicare shortfall that is “only” 10%. That’s better, but it’s still
a 10% loss. And don’t forget these loss numbers are averages.
Many hospitals would undoubtedly lose more, sometimes
through circumstances beyond their control. M4A would also
eliminate the excess of revenue over expenses hospitals cur-
rently earn from commercially insured patients that currently
keeps many institutions afoat.
Out of fairness, M4A proponents predict cost savings
through restructuring administrative processes, allowing
hospitals to deal with just one insurance program instead of
dozens and dozens. Furthermore, M4A supporters predict the
government would be able to negotiate signifcant savings on
pharmaceuticals. These savings could possibly happen, but it
would take a lot of streamlining and some powerful negotia-
tions with drug companies to make up for an average 10% loss
on every single patient.
There is much to be said for providing care to everyone,
but I have to remind you of the troubling past performance
of the two existing major public programs – Medicare and
Medicaid. I don’t believe anyone in either state or federal gov-
ernment is maliciously underfunding these programs. When
budgets are developed each year, representatives of the health-
care community remind politicians that the programs aren’t
carrying their weight fnancially and urge them to at least
bring them up to break-even. In response, the elected offcials
express sympathy over providers’ plight but tell them they just
don’t have the funds.
What this means is that healthcare payments are no longer
policy driven or designed to maximize access, quality, and
cost-effectiveness (the three-legged stool). Instead, they have

become strictly subject to budgetary forces. Just refer back to
my Georgia Medicaid outpatient example explained above
where it’s impossible for hospitals to not lose money. Everyone
knows the policy has to result in a fnancial loss. As much as
the politicians might like to fully cover costs, they just can’t.
In light of this depressingly consistent history of underfunding
of both Medicare and Medicaid year after year, why would we
think that payments under M4A would fare any better?
Several analyses of Senator Bernie Sanders’ 2016 version
of M4A estimate a jaw-dropping price tag. A George Mason
University study predicted costs at $32.6 trillion over 10
years. This number is in the same ballpark as other analyses’
projections. According to U.S. News and World Report, even
doubling all federal individual and corporate income taxes
wouldn’t fully fund Sanders’ plan. Former Clinton admin-
istration senior health policy advisor and Emory University
professor Kenneth Thorpe – hardly a right-wing spokesman –
said, “Even though people don’t pay premiums, tax increases
are going to be enormous. There are going to be a lot
of people who’ll pay more in taxes than they save on
premiums.”29 A senior executive at one ambulatory surgery
company reports that his organization estimated the implica-
tions if they had to operate under M4A. They concluded that
23 of their 24 sites would be bankrupted.30 And, fnally, an
analytical piece in the respected publication HealthLeaders
sports the headline “Medicare for All Could Reduce Hospital
Revenues by 16%.” This article also references a JAMA report
that concludes M4A would “do little to encourage hospital
effciency.” A parallel analysis by the consulting frm Navigant
concludes some hospitals would experience a margin decline
of more than 22%.31
Given the government’s track record, if M4A somehow
managed to survive what could be the political fght of the
century, how likely is it that the program would fully cover the
cost of care in the long run? I shudder to think what would
happen if we carried over the current Medicare program’s 10%

loss to M4A and the “promised” administrative and drug sav-
ings didn’t materialize.
Did You Notice?

As an interesting side-note, you may have picked up that I
have not used the word “reimbursement” anywhere in this
chapter. That’s because neither hospitals nor physicians are
really reimbursed for the care they provide. They are paid.
Reimbursement, by defnition, involves someone spending
money for a given purpose, submitting documentation for
their expenditure, and then receiving the entire amount back.
As we have seen, that’s not at all the way it works in health-
care. With the public programs like Medicare and Medicaid,
the federal or state governments decide the amount they will
pay for a given treatment, the provider submits the required
documentation, and then the program pays whatever amount
they have determined. And the statistics I have presented
demonstrate that, most of the time, the payment falls short of
what the care actually costs. So, no, these are not reimburse-
ments, they are payments. And they don’t adequately cover
what it costs to provide the care.
In the same vein, most private insurance companies
like Blue Cross, Cigna, Humana, Coventry, and others typi-
cally pay set amounts rather than truly reimbursing provid-
ers. Fortunately, though, these payments are usually more
generous.
Final Thought
This chapter describes the bleak fnancial climate hospitals
and physicians must operate in. If you are selling products or
services into the healthcare world, you must be sensitive to
the fnancial challenges it faces. And you must develop your

strategies and messaging with this jacked-up world in mind.
Providers respect vendors and others who appreciate the dif-
fculties they experience because of environmental factors
beyond their control.
End Notes
1. The Agency for Healthcare Research and Quality, “The Number
of Practicing Primary Care Physicians in the United States,”
https://www.ahrq.gov/research/fndings/factsheets/primary/
pcwork1/index.html, accessed April 1, 2019.
2. American Hospital Association, “Fast Facts on U.S. Hospitals
– 2018,” https://www.aha.org/statistics/fast-facts-us-hospitals,
accessed April 1, 2019.
3. Rick Pollack, “How hospitals are redesigning care delivery to
serve changing needs,” Modern Healthcare, September 26,
2015, https://www.modernhealthcare.com/article/20150926/
MAGAZINE/309269977/how-hospitals-are-redesigning-care-
delivery-to-serve-changing-needs, accessed March 3, 2019.
4. Kelly Gooch, “Health system executives expect 25% of care
delivery payments to be value-based in 2019,” Becker’s Hospital
CFO Report, February 21, 2019, https://www.beckershospitalreview.
com/fnance/health-system-executives-expect-25-of-care-
delivery-payments-to-be-value-based-in-2019.html, accessed
March 8, 2019.
5. Kaiser Family Foundation, https://www.kff.org/other/state-
indicator/total-population/?currentTimeframe=0&sortModel=%
7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D,
accessed March 7, 2019.
6. Georgia Hospital Association, Hospitals 101, 8th edition, 2019,
page 17, www/gha.org, accessed March 8, 2019.
7. Tara Bannow, “Outpatient revenue catching up to inpatient,”
Modern Healthcare, January 7, 2019, page 6.
8. Laura Snyder and Robin Rudowitz, “Medicaid Financing:
How Does it Work and What are the Implications?” https://
www.kff.org/medicaid/issue-brief/medicaid-fnancing-how-
does-it-work-and-what-are-the-implications/, accessed
March 7, 2019.
9. https://www.kff.org/interactive/medicaid-state-fact-sheets/,
10. American Hospital Association, “Underpayment by Medicare
and Medicaid Fact Sheet – January 2019,” www.aha.org,
11. The Urban Institute, “Repeal of the Boren Amendment,” https://
www.urban.org/research/publication/repeal-boren-amendment,
12. Kaiser Family Foundation, https://www.kff.org/other/state-
indicator/total-population/?currentTimeframe=0&sortModel=%
7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D,
13. Peter Ubel, “Why Many Physicians Are Reluctant to See
Medicaid Patients,” November 9, 2013, www.forbes.com,
14. Rich Daly, “Hospital Medicare Margins Decline Further,”
December 10, 2018, https://www.hfma.org/Content.
aspx?id=62592, accessed March 20, 2019.
15. “MedPAC wants to boost Medicare acute-care hospital pay-
ments 2.8%, Modern Healthcare, March 18, 2019, page 2.
16. https://www.gha.org/News/Reference-Guides, accessed
March 20, 2019.
17. ibid.
18. Peter Ubel, “Why Many Physicians Are Reluctant to See
Medicaid Patients,” November 9, 2013, www.forbes.com,
19. Kaiser Family Foundation, “Key Facts about the Uninsured
Population,” December 7, 2018, https://www.kff.org/uninsured/
fact-sheet/key-facts-about-the-uninsured-population/, accessed
March 9, 2019.
20. Molly Gamble, “America’s Payor Mix by Region,” Becker’s Hospital
CFO Report, April 9, 2012, https://www.beckershospitalreview.
com/fnance/americas-payor-mix-by-region.html, accessed
August 3, 2019.
21. “Tough Economic Times Motivate Hospitals to Migrate Away
from Unproftable Clinical Service Lines,” the DARK Daily,
March 7, 2012, https://www.darkdaily.com/tough-economic-
times-motivate-hospitals-to-migrate-away-from-unproftable-
clinical-service-lines-30712/, accessed March 21, 2019.
22. Alex Kacik, “Financial concerns may lead to high-margin ser-
vice line imbalance,” Modern Healthcare, June 3, 2019, p. 17.
23. https://www.shepscenter.unc.edu/programs-projects/rural-
health/rural-hospital-closures/, accessed March 20, 2019.
24. Alex Kacik, “Fewer independent hospitals can weather oper-
ating headwinds,” Modern Healthcare, February 25, 2019,
page 16.
25. Keely Gooch, “1 in 5 rural hospitals at high risk of closing,
analysis fnds,” Becker’s Hospital CFO Report, February 20, 2019,
https://www.beckershospitalreview.com/fnance/1-in-5-rural-
hospitals-at-high-risk-of-closing-analysis-fnds.html, accessed
March 8, 2019.
26. Lauren Weber and Andy Miller, “Hospital Crisis Is Killing
Rural Communities. This State is Ground Zero,” Huffngton
Post, September 22, 2017 and updated June 4, 2018,
https://www.huffpost.com/entry/rural-hospitals-closure-
georgia_n_59c02bf4e4b087fdf5075e38, accessed March 20,
2019.
27. Reported in Susannah Luthi, “Grassley back at it, ramping
up scrutiny of tax-exempt hospitals,” Modern Healthcare,
March 11, 2019, page 12.
28. Merrill Goozner, “M4A isn’t the only way to go,” Modern
Healthcare, March 18, 2019, page 24.
29. Ricardo Alonso-Zaldivar, “Study: ‘Medicare for All’ Projected to
Cost $32.6 Trillion,” U.S. News and World Report, July 30, 2018,
https://www.usnews.com/news/business/articles/2018-07-30/
study-medicare-for-all-bill-estimated-at-326-trillion, accessed
April 3, 2019.
30. Thomas Mallon, “Cost shifting makes Medicare, Medicaid look
good,” Modern Healthcare, February 18, 2019, page 28.
31. Jack O’Brien, “Medicare for All Could Reduce Hospital
Revenues by 16%,” HealthLeaders, April 5, 2019, https://www.
healthleadersmedia.com/fnance/medicare-all-could-reduce-
hospital-revenues-16, accessed April 28, 2019.
Chapter 2
Six Things That

Don’t Make Sense
After reading the last chapter, some readers may be bewildered

by the complexities of how healthcare is organized and paid
for. To put it mildly, the whole thing is a mess. I have said many
times that if I set out to design a totally confusing and dysfunc-
tional way to deliver and fnance healthcare services, it might be
tough to come up with anything better than what we have.
I am profoundly thankful for my decades-long associa-
tion with the healthcare world, but due to its dysfunctional-
ity, I have also experienced many frustrations. This chapter
is designed to help you further understand a few things that
aggravate some of the healthcare people you will interact with.
Although I could probably fll an entire book listing things that
don’t make sense, I will present just six in this chapter.
1. Fundamental Confusion about Who the

Customer Really Is and How That Drives
the Purchasing Decision
In most industries, the person who orders and pays for the
product or service is clearly the customer. There may also be a
27
middleman, but that person essentially acts as an extension of

the decision-maker.
When it comes to clinical services, though, there are really
three customers:
1. The physician, who is the only one who can authorize

ordering the care
2. The patient, who is the actual recipient of the care
3. The insurance company that pays for the care
With so many parties with varying interests involved, it’s not

surprising that conficts often arise. The well-intentioned phy-
sician wants to offer all the diagnostic tests and interventions
they feel are necessary for optimal outcomes. The payer wants
to assure that only the clearly medically necessary services are
offered and, therefore, often erects speed bumps to authorize
only the care it deems appropriate. Patients are often caught in
the middle and generally lack the medical knowledge to infu-
ence the decision. In recent years, pharmaceutical manufactur-
ers have capitalized on the patients’ role and have successfully
increased demand for some of their products through direct-
to-consumer advertisements.
As one health system CEO puts it, “What other business
model exists where the person ordering the service doesn’t
use it, the person receiving the service doesn’t pay for it, and
the entity paying for the service doesn’t use it? It’s a strange
economic model but one that must be understood!”
2. The Underfunding of Medicare and Medicaid

This is right at the top of the list of things that doesn’t make
sense. I think I made a pretty strong case in the last chapter
that the inadequacy of payments from the two largest public
payers cascades down through the entire care delivery system.
I need not say more but did want to spotlight it here since it
Six Things That Don’t Make Sense ◾ 29
represents such a major issue for everyone you encounter as

you try to sell your products or services.
3. Unfunded Mandates and Overbearing

Regulation
This one is almost as bad as Medicare and Medicaid
underfunding.
Oversight to protect all parties is necessary for any indus-
try, especially one as personal as healthcare. Policies and
programs designed to maximize patient safety and opera-
tional effciency are to be applauded. But responding to these
requirements costs money. Unfortunately, payment seldom
accompanies the mandate. Or if there is funding, it only cov-
ers part of the cost. Let me highlight just a few of healthcare’s
unfunded mandates.
Emergency Medical Treatment and Active

Labor Act of 1986
Back in the 1980s, there were several highly publicized cases
where patients who had presented to hospital Emergency
Departments (EDs) were not adequately treated and were sub-
sequently sent away. A few of them died, one even in an ED
parking lot.
The public understandably got up in arms over this, and
their concern fed into a public policy stream that eventually
resulted in the passage of the Emergency Medical Treatment
and Active Labor Act of 1986 (EMTALA). This law requires
hospitals to evaluate and stabilize every patient who goes to
the ED, regardless of their ability to pay.
This is an entirely appropriate requirement. It’s unthinkable
that somebody in a medical crisis would be turned away. Most
hospitals go beyond EMTALA’s strict requirement and treat
patients beyond just evaluating and stabilizing them.
Although EMTALA provides a lifeline to many people who

otherwise have no options, there are two problems with this
policy:
1. There are absolutely no payment dollars attached to this

requirement. The hospital must provide the care but often
receives no payment whatsoever. As we saw in the last
chapter, hospitals already experience signifcant fnancial
challenges, and this just makes the problem worse.
2. A small percentage of patients has fgured out that this is
their all-access pass to free care. Several years ago, I had
a conversation with some Emergency Medical Technicians
(EMTs) – who also operate under similar requirements to
provide their service to all – where they told a discourag-
ing story of someone milking the system. Bertha was one
of their “regulars” who frequently called for transporta-
tion. Just the previous week, Bertha had called 911 saying
she had a medical emergency. By law, the EMTs had to
go to her house, and when they arrived, they discovered
that her “emergency” was that she had a doctor’s visit in a
medical offce building next to her “regular” hospital.
“Bertha,” they told her, “you know that we can’t take
you to your doctor’s appointment. That’s not a real medi-
cal emergency.” Suddenly, Bertha clutched her chest and
exclaimed, “Oh, my goodness. I’m having chest pains.”
That was her “taxi” ticket to the hospital. Once there, she
walked over to her physician’s offce.
This is a somewhat extreme and perhaps rare case, but many

providers feel they are regularly being taken advantage of
because of mandates like this.
Health Insurance Portability and Accountability

Act of 1996
The Health Insurance Portability and Accountability Act of
1996 (HIPAA) set in motion incredibly complex and detailed
requirements around patient information privacy. Among the

requirements for healthcare organizations HIPAA set in motion
were the following:
◾ A pre-emption analysis comparing state law and judicial

case requirements with the new federal ones to determine
which is more restrictive
◾ A thorough analysis of existing internal policies to deter-
mine what changes are required
◾ The lengthy legal review and renegotiation of most out-
side contracts
◾ Assessment of existing information systems and secu-
rity policies and the remediation work required to bring
everything into compliance
◾ The extensive and ongoing training of all personnel to
ensure compliance
◾ Updating notices of privacy practices
◾ Updating breach notifcation practices
◾ Updating business associate agreements
HIPAA regulations provided no direct funding for any of this.

A few years ago, Modern Healthcare published in
“Outliers,” its light-hearted back page feature, an article
entitled “3,500 years of HIPAA.” The author calculated that
each year providers and patients spend about 30.7 million
hours complying with just HIPAA’s notice of privacy practices
requirements. The story summarizes the situation like this:
“Think of it as 35 centuries worth of bureaucracy.”1 Maybe this
article isn’t that light-hearted after all.
Other Regulatory Requirements

Here’s just a smattering of other unfunded or seriously under-
funded mandates:
◾ Changing from the ICD-9-CM medical coding system to
the ICD-10-CM system – This massive effort affected every
single medical encounter for every physician in the country.
◾ Achieving “Meaningful Use” of Electronic Health Records

(EHRs) – Despite the signifcant federal funding provided,
Becker’s Health IT & CIO Review reports that the incen-
tives only covered 20–25% of the total cost to implement
EHRs and achieve meaningful use status.2
◾ Participating in numerous overlapping, duplicative qual-
ity reporting programs required either by governmental
agencies, different insurance companies, or private groups
trying to control healthcare spending.
◾ Complying with the Americans with Disabilities Act.
These are just a few of the many, many requirements driven

by external forces and which receive little or no fnancial
support.
In November 2017, the American Hospital Association
released a document called “Regulatory Overload Report.”
Here are some highlights:
◾ Hospitals and health systems face 629 separate regula-

tory requirements across nine domains overseen by the
Centers for Medicare & Medicaid Services (CMS), the
Offce of the Inspector General (OIG), the Offce of Civil
Rights (OCR), and the Offce of the National Coordinator
for Health Information Technology (ONCHIT).
◾ Hospitals and health systems spend nearly $39 billion a
year to comply with all these regulations.
◾ An average hospital must fund 59 Full-Time Equivalents
(FTEs) for compliance purposes. More than 25% of
these employees are highly trained – read “expensive” –
physicians and nurses.
◾ The fraud and abuse laws – which impose very strict
rules governing fnancial incentives hospitals can offer
physicians – were written in another era and are counter-
productive to the current emphasis on great coordination
among all caregivers.3 On the one hand, hospitals and
physicians are told to more closely coordinate care, but
on the other hand, anti-fraud and anti-kickback regula-

tions restrict the type of incentives they can implement to
fully support this.
Again, it’s hard to argue against the need for regulations

that maximize safety and protect patients. But many in the
healthcare industry feel that regulators have gone way over-
board and have unnecessarily added complexity. The whole
situation would be far more palatable if those mandating the
activities compensated those charged with complying. It’s
easy to mandate something but another thing to carry it out.
This situation reminds me of one of my favorite sayings in
life: “Nothing is impossible for the man who doesn’t have to
do it himself.”4
4. Being at the Mercy of Others

This item is related to the previous one. Allow me to share
some anecdotes that illustrate how providers are often down-
stream of other people’s troubling actions.
A Statewide, Retrospective Audit

of Inpatient Cases
Whoever pays the bills has the right to defne the rules and
demand accountability. But sometimes their oversight goes
too far.
Soon after I started my job at Georgia Hospital
Association (GHA), we learned that the Medicare program
was conducting a massive audit of all the hospitals in the
state to see if they were overbilling for a certain inpatient
diagnosis. In 1984, Medicare started paying for inpatient care
under a system called Diagnosis-Related Groups (DRGs).
The idea is that most patients with the same medical con-
ditions should require roughly the same type of treatment
and resources for their care. So, rather than pay for every
test, procedure, medication, etc. done while the patient is
an inpatient, Medicare now pays the same amount for each
admission for the same category of problem. They came up
with an initial list of about 500 separate reasons people are
admitted to a hospital, and they pay according to which-
ever bucket the patient ends up in, based on the medical
codes on the patient’s record. (The list of DRGs has since
expanded to about 1,000.)
The DRG system does recognize that there is some varia-
tion in patient conditions and needs. Not every pneumonia
case is simple. Patients sometimes have other conditions at
the same time. Consequently, there are some “pairs” of DRGs
where simpler cases are given the “regular” DRG designation,
and more complex ones are assigned to a DRG “with compli-
cations.” From the start of the DRG system, regulators were
concerned that hospitals might be tempted to “upcode” cases,
making them look more severe than they really were in order
to get higher payments.
There are pretty clear defnitions of the differences between
a DRG with complications and a DRG without complications.
But, because no two cases are identical and because there is
a certain amount of judgment involved when assigning indi-
vidual diagnostic and condition codes on the medical record,
it is possible for a more “aggressive” medical coder to end up
coding in such a way that the patient is assigned to the “with
complications” DRG when that might be pushing things.
The allegation behind the statewide audit in Georgia was
that hospitals were either intentionally gaming the system and
upcoding patient records or were mismanaged and unaware
of faulty coding. In either case, they would be inappropriately
collecting more than they were due. Virtually every hospital
in the state was required to submit extensive documentation
on every “with complications” patient discharged during the
period of time in question for the particular condition being
investigated.
Hospitals were understandably concerned for two reasons:
1. Their integrity was being questioned – A GHA spokesman

pointed out in a newspaper interview that the implica-
tion of the extensive audit was that almost all the hos-
pitals in the state were either acting fraudulently (if they
were knowingly overcharging) or were lacking appropri-
ate oversight (if their governing boards were unaware of
the sloppy management that allowed inaccurate billing).
Either case would be an unwelcomed reproach of the
hospitals’ governing boards and seems unlikely consider-
ing that boards are populated by respected pillars of their
communities. How likely was it that hundreds of recog-
nized leaders all across the state were either so dishonest
or inept?
2. Hospitals spent several months and large sums of money
providing the required documentation. Besides having
to hire additional staff to pull medical records, review
charts, and possibly conduct additional coding, they also
incurred considerable legal and consulting expenses pre-
paring their documentation and defenses.
When all was said and done, of the more than 100 hospitals
investigated, only one received a fairly signifcant fne, and
a second one got a slap on the wrist. Every other institution
drawn into the investigation was completely exonerated, but
this scrutiny cost Georgia’s hospital millions and millions of
dollars.
When it comes to investigating fraud, there are four catego-
ries that sometimes get muddled in people’s minds:
1. Fraud – These are obvious illegal activities, like sending

bills from a fctional clinic using the address of a Chicago
airport parking deck as its location, or a solo practitio-
ner physician billing for 80 procedures a day when each
procedure takes 30 minutes. This is clearly impossible
mathematically. Fortunately, this level of blatantly dishon-

est activity is rare.
2. Abuse – This is where a provider discovers a loophole
that allows an activity that is technically allowable but
still inappropriate. The audit of possible upcoding of DRG
pairs, as in the case just cited, would probably fall into
this category.
3. Mistakes – Any complex process is subject to errors. The
number of inputs involved in generating and submitting a
hospital bill is formidable, and honest mistakes sometimes
happen.
4. Confusion over regulations – Whenever there is a signif-
cant regulatory change, it can take some time to fgure
out all its nuances. I remember felding questions at GHA
from members asking how to interpret a particular new
requirement that could be taken two or more ways. Since
we hadn’t written the regulations in question, we didn’t
know, so we contacted the appropriate agency. Sometimes
they were unable to answer the questions either. We care-
fully documented their answers (or lack of an answer), but
this was always a bit troubling. Over my career, I saw the
high turnover rates at various governmental agencies. The
future leaders wouldn’t always feel compelled to abide by
their predecessors’ interpretations, especially if their inter-
pretations were somewhat unclear. We always feared that
a few years down the road, a different bureaucrat would
retroactively reinterpret a regulation in a way that would
deem, after the fact, a hospital’s action as being out of
compliance and potentially fraudulent.
If you prepare your own income tax returns, haven’t you

discovered after fling that you made an innocent mistake (as
in 3 above) or misinterpreted a policy (as in 4 above)? After
I received my second audit notice from the IRS because of
honest mistakes on my part, I decided hiring a tax expert is
well worth the cost.
People who oversee the regulatory process sometimes fail

to distinguish among these four categories and can conclude
that every violation or mistake is willful fraud. Hospitals and
physicians resent this.
Questionable Interpretation of Defnitions

of What Constitutes a True Medical Emergency
Like many other states, Georgia moved many of its Medicaid
patients into managed care arrangements several years ago.
The state was trying to rein in overall costs, so part of the
strategy was to only pay for ED visits that were true emergen-
cies. Cases that were not deemed emergencies were paid a
very modest fee, initially $50 and later increased a bit. Fifty
dollars doesn’t even come close to covering the hard costs of
an ED visit.
There were two problems with this policy:
1. EMTALA – As we saw above, every patient who goes to

an ED – for any reason at all – must be screened and sta-
bilized. The hospital has absolutely no control over their
decision. And since many people lack access to physician
care, they end up using the hospital ED as their primary
care provider. Why should the hospital be penalized
because some patients have no other recourse or if others
abuse the system?
2. The determination of whether a case was truly an emer-
gency was left to each managed care organization, and
their judgments were sometimes questionable at best. The
“average person” is not medically trained and wouldn’t
necessarily know what constitutes a true medical emer-
gency. Therefore, federal requirements state that a con-
dition that a “prudent layperson” would consider a true
emergency should be paid as such.
Not soon after the Medicaid $50 payment for a non-
emergency visit was enacted, our hospitals started
complaining loudly that the care management organiza-

tions were denying full payments for cases that anyone
would consider true emergencies. Here are just a few
examples:
– A pregnant woman who was experiencing vaginal
bleeding
– A young man who crashed his pickup truck and
bashed his head through the windshield
– A two-year-old who had a high fever in the middle of
the night, had been seen by a pediatrician earlier that
day, and whose mother was told to seek care immedi-
ately if the fever got worse
None of these was deemed an emergency, and the hospitals

were initially paid $50 for each case.
Suffering Huge Payment Delays Because

of a Botched IT System Conversion
Providers in one Western state experienced a months-long
nightmare when its state’s Medicaid program converted
to a new IT system. Capacity requirements were woefully
underestimated, and the system crashed immediately upon
implementation. Hospital billing departments could seldom
log on to the system, and when they could, lag times were
horrendous. Many hospitals resorted to paying staff for
extensive overtime hours or hiring temporary personnel to
constantly monitor traffc level and jump onto the system the
moment capacity opened up. Others had billing staff report
at 3:00 a.m. when traffc was lighter. All these efforts added
signifcant unbudgeted expenses for a program that – as we
saw in the last chapter – already failed to pay the total cost
of care.
Since insurance programs don’t pay claims without submis-
sion of accurate data, and since the IT system was essentially
non-functional, this situation created massive payment delays.
It got so bad that eventually the Medicaid program started

cutting checks based on estimated volumes rather than tying
payments to actual individual cases. This made some hospi-
tals nervous about the possibility of a future Medicaid off-
cial attempting to reconcile payments to actual claims, being
unable to do so, and challenging the appropriateness of cer-
tain payments. The entire system conversion was a disaster,
and providers were left holding the bag.
These are just three examples of how hospitals and other
healthcare providers are often at the mercy of other people’s
actions and decisions that create chaos downstream.
5. Programs That Look Good on Paper

but Which Might Make No Sense
in the Long Run
The most effective way to get doctors and hospitals to change
their behavior is to change how they are paid, an approach
CMS has been using for years. Many of these initiatives are
designed to be budget-neutral. CMS decides on an outcome
designed to either improve patient care or save money and
then changes incentives to encourage the desired end. This
typically results in additional payment to those who success-
fully respond to the new incentives, but in order to keep the
program budget-neutral, CMS penalizes others who are less
compliant.
One recent CMS initiative – the Medicare Hospital-Acquired
Condition (HAC) program which is designed to reduce infec-
tions – contains a stick but offers no carrots. It imposes a
penalty for poor results without offering a reward for superior
performance. Hospitals in the bottom performance quartile
are fnancially penalized on all their future Medicare dis-
charges for a certain period of time. Performance is evalu-
ated each year and new penalties are imposed for subsequent
periods.
On the surface, this seems like a reasonable way to encour-

age hospitals to improve: get better, “or else.” This is a great
theory, except for two things:
1. The approach would be valid if every hospital were start-

ing from the same point with the same chance to be a
top performer. That would be a fair horse race. However,
this is not the case. For a variety of reasons – including
geography, strength of medical staff, level of resources,
payer mix, and other factors – some hospitals start with a
distinct disadvantage. This is like lining a dozen runners
up at the start of a 5K race and placing ankle weights of
various sizes – some quite considerable – on some of the
participants. Starting conditions are not equal for all.
2. There is a compounding effect of the penalties. By defni-
tion, 25% of hospitals have to end up in the lowest quar-
tile every year, thereby being penalized. If objection 1 is
valid and some institutions are unfairly handicapped, at
least some of the penalized hospitals may end up at the
bottom due, at least in part, to factors beyond their con-
trol. The good news is that each year offers a new oppor-
tunity to improve.
However, if every hospital takes the program seriously
and does all it can to improve, low-performing provid-
ers are at a continued disadvantage. Even if a bottom-
tier facility reduces its HAC rate, all other hospitals may
do so as well. If everyone – including this year’s bottom
performers – improves by, say, 1 percentage point, this
year’s bottom-tier hospitals will still be there next year
despite their improvement. The only way out is to leapfrog
hospitals in the next category up, improving more than
the next tier hospitals do. But how likely is that? Some of
the lowest group hospitals are already disadvantaged, and
now the program further reduces their payments mak-
ing it even less likely that they can escape from the base-
ment. Despite their improvement, they will continue to
be penalized. Going back to the 5K analogy, this would

be like going to one of the runners who had a 10-pound
weight on each leg and who fnished at the back of the
pack and putting 15-pound weights on for the next race.
So even though the theory of a fnancial penalty seems
sensible, it can contribute to a long, slow death spiral for
some of our most vulnerable hospitals. Is this what we
really want?
This is just one example of a zero-sum program that, although

well-intentioned, may not make sense in the long run.
6. The Lack of Uniform IT Communications

Protocols
This one is pretty esoteric, and the only people within the
healthcare provider’s world who probably “get” this one are IT
professionals.
About 15 years ago, I had an inkling that right about now, the
healthcare technology world would look back to a very unwise
regulatory decision made concerning EHRs. I was having coffee
with a friend who was a fairly senior leader at the Department
of Health and Human Services and asked, “Why aren’t you guys
defning the technical communication standards and protocols
for EHRs? Right now, each vendor has its own specs and uses
proprietary programming. This means EHRs from different ven-
dor companies can’t communicate with each other.”
“Well,” he answered, “our philosophy is that the federal
government shouldn’t micromanage the standard-setting pro-
cess. We think the free market should address this.”
I hope I hid my shock at hearing this totally nonsensical
answer. That would be like saying that local electrical coops
should feel free to determine voltage output to suit their per-
sonal preferences. Why not produce 230-volt current like
European countries do instead of the US standard of 120 volts?
Why not 400 volts? Allowing this variation would be fne as

long as two conditions exist:
1. The local power company is a closed system with no

need to connect to the larger electric grid.
2. All of the power company’s customers are OK with their
appliances frying from the catastrophically elevated elec-
trical output if it plugs in a device designed for the wrong
system.
Since the federal government offered billions of incentive

dollars to encourage broader adoption of EHRs with the end
of greater data portability, wouldn’t it have made sense – to
shift metaphors – for everyone to speak a common language
instead of some speaking Portuguese, others speaking English,
and still others speaking Hungarian?
The other thought that went through my mind was that the
federal government regulates seemingly everything hospitals
and physicians do, from EMTALA rules regarding screen-
ing and stabilizing all ED patients, to Occupational Safety
and Health Administration requirements, to compliance with
Medicare billing protocols. Why not set technical communica-
tions protocols that would allow for easy transfer of relevant
data among providers?
Earlier in this chapter, I railed against over-regulation.
Isn’t it ironic that now I’m suggesting that there should have
been more regulation in this arena? This is one area where
strict requirements would have actually helped. The federal
government should have convened a group of healthcare
IT professionals to defne the best technical communica-
tions standards and protocols and then pick a target date –
perhaps fve years out – for full migration to those standards.
Essentially, the message to vendors would have been, “You’re
free to write to any technology communications standards
you like, but if you want your customers to buy your prod-
ucts, we suggest you migrate toward these standards since
everyone else will be using them. And you have fve years to
get there.”
Unfortunately, this was not the path chosen, and we could
have been much further down to road toward truly useful
interoperability. What a missed opportunity!
Final Thought
As I said, there are many, many aspects of the healthcare
delivery system that seem to defy logic. I’m not including
these just to “ventilate” over these frustration points. Having
some sense of the environment clinicians and executives oper-
ate in may help you understand their frustrations and interpret
some of the reactions you may get as you present your prod-
ucts or services to them. If you can describe your product as a
solution – or at least a partial solution – to one of these prob-
lems, you will be welcomed with open arms.
End Notes
1. Modern Healthcare, “Outliers: 3,500 years of HIPAA,”
https://www.modernhealthcare.com/article/20130907/
MAGAZINE/309079915/outliers-3-500-years-of-hipaa, September 7,
2013, accessed April 29, 2019.
2. Michael Sinno, “8 Problems Surrounding Meaningful Use,”
Becker’s Health IT & CIO Review, April 28, 2011, accessed
March 29, 2019.
3. American Hospital Association, “Regulatory Overload Report,”
https://www.aha.org/guidesreports/2017-11-03-regulatory-
overload-report, November 2017, accessed March 25, 2019.
4. Arthur Bloch, Murphy’s Law and other reasons why things go
wrong 1 (Los Angeles: Price/Stern/Sloan, 1978), page 80.
Chapter 3
Three Ideas to Make

Things Better
So far, I have painted a pretty gloomy picture of our health-

care system. I outlined in Chapter 1 the less-than-ideal way it’s
fnanced, and I described in Chapter 2 a number of providers’
major frustration points. Just to recap, here is the list of things
that don’t make sense to hospitals, health systems, physicians,
and other clinicians:
1. Fundamental confusion about who the customer really is

and how that drives the purchasing decision
2. The underfunding of Medicare and Medicaid
3. Unfunded mandates and overbearing regulation
4. Being at the mercy of others
5. Programs that look good on paper but which might make
no sense in the long run
6. The lack of uniform IT communications protocols
The frst one is an inherent part of the system and will prob-
ably never change. Numbers 2 through 5 will only be fxed if
those in charge change their policies and approaches. I don’t
expect that to happen any time soon. Concerning number 6,
we’ve already burned many years when we could have been
45
developing IT technical standards, and I’m not hearing any-

thing that leads me to believe that the federal government will
suddenly reverse course.
However, when it comes to reforming the system, all is
not lost. There may be some creative ways to rethink how
we fnance care delivery. The old cliché tells us to follow the
money, so let’s do that. The fscal incentives in today’s system
have created the system we have. To change the endpoint, we
need to look upstream.
The three proposals in this chapter are not magic bullets,
and nothing is ever as easy as it seems. Although these ideas
only address part of the problem, implementing them could
bring us at least part way down the road. These concepts are
not necessarily designed to be implemented together. Each is
extremely complex in its own right, and trying to link them for
simultaneous adoption would almost certainly sink the entire
effort. I am presenting these as discussion points which need
extensive feshing-out.
Idea 1 – Develop a Truly Effective Preventive

Care Approach
One of the most frequent and valid criticisms of our current
system is that we focus far more on treating people rather
than helping them avoid medical problems in the frst place.
Trying to prevent illness – or at least intercepting it as early on
as possible – is both better for the patient and, in many cases,
cheaper in the long run.
The reason that I qualify my comment about being cheaper
is that some preventive interventions – even if they are rela-
tively inexpensive – may not necessarily be truly cost-effective.
There are two reasons for this:
1. Actually realizing theoretical savings from preventive pro-

grams can be diffcult
2. People sometimes confuse unit cost and total cost
Three Ideas to Make Things Better ◾ 47
Let me explain what I mean through the following example.

I had a cousin who, unfortunately, had major mental health
issues: schizophrenia and manic depression. He spent many
years drifting through various levels of lucidity. There were
times when he was able to function fairly well on his own,
but other times when he needed to be hospitalized. During
one of his hospitalizations, he gradually improved to the
point that he was almost – but not quite – capable of liv-
ing on his own. The state where he lived was considering
expanding its halfway house program where patients could
live in an environment where their living circumstances
would be monitored and they would receive medication
supervision. Beyond that, they would otherwise be free to
come and go as they pleased, get a job, and try to live some-
what normal lives.
My cousin’s dad loved this concept and started a cam-
paign to expand the program. In the course of his activism,
he uncovered some statistics he felt supported his case. At the
time, an inpatient day in the state mental hospital cost about
$400 while the cost of the halfway house was closer to $175.
The implication was that by moving a patient from an inpa-
tient unit to the halfway house, the state could save $225 a
day. Wouldn’t that make sense?
Maybe yes, maybe no. Let’s take a closer look at the two
factors I mentioned above:
1. The diffculty of truly capturing savings – If my cousin

moved from the inpatient facility, how much would the
state truly save? Almost nothing. His inpatient psychiat-
ric unit would still be open. The building’s utility bills
wouldn’t go down. The hospital director’s salary would
be unchanged. Reducing patient census by one person
wouldn’t even have enough impact on the direct staffng
needs to cut down on frontline personnel.
However, if several patients from the same unit could
move into the new program, some inpatient staffng
positions could be eliminated, and you could begin to

reduce costs. If enough patients transferred, the hospital
might be able to close down a unit or possibly even an
entire building. But saving money by moving all those
patients would only work if they were currently housed
together. This is not always the case for patients with dif-
fering care needs. If they were not “clustered” within a
single unit but were instead scattered throughout the facil-
ity, capturing savings would be harder.
Even if whole units or even an entire building were
closed, the true savings probably wouldn’t approach
$225 per day. When a hospital reports total cost per day
that includes every cost element divided by the number
of patient days. Total expenses include the salaries of
executives who oversee the entire facility, the cost of
compliance with mandated reporting, expenses for main-
taining and upgrading the IT system, and many other
items. Additionally, although a building may be out of
service, it still requires a minimal degree of maintenance,
including some level of utilities, groundskeeping, etc. So,
if part of a facility shut down although there could be
substantial cost reduction, the daily savings wouldn’t be
$225 per patient day.
2. Confusion over unit cost and total cost – Healthcare often
experiences something called “The Woodwork Effect.”
This is where people who currently receive no care
“come out of the woodwork” to get help when a new
option is offered. Having a halfway house for psychiat-
ric inpatients who no longer need to be institutionalized
would certainly be benefcial for them, and it could pos-
sibly save a decent amount of money if – as described
above – the program were big enough to truly realize
signifcant cuts in operational costs. Such an alternative
would also undoubtedly be of great value to some com-
munity-based patients who might otherwise be at risk of
inpatient admission.
However, would the net impact of expansion on the

total cost of the state’s psychiatric program be positive
or negative? It all comes down to the numbers. Would
enough inpatients be able to transfer to the new care
level to save substantial money on the inpatient side? How
many non-institutionalized patients would pursue the
halfway house option? What would adding all those new
halfway house residents do to the state’s global psychi-
atric care budget? Of those community-based patients
who enter the halfway house program, how many would
have been admitted as inpatients had they not sought
placement in the halfway house? Would that “anticipated
savings” from avoided inpatient admissions be enough to
offset the cost of the new program option? These are all
tough questions to answer.
(As an aside, one way to counteract the Woodwork
Effect in this example would be to limit eligibility for
the halfway house to patients moving there from an
inpatient facility. No one could enter directly from the
community.)
The point is that you can’t just “do the math” in a cavalier way
by simply comparing the costs per day for the halfway house
program and the inpatient program and bank on collecting the
entire difference. It could well be that the new level is fnan-
cially viable, but that calculation is not as simple as it appears
on the surface, and the savings are likely to be far less than
the straightforward arithmetic would suggest.
Let’s Talk Prevention

With this as a background, let’s look at preventive care in
general. Not smoking, managing stress, getting adequate nutri-
tion, maintaining appropriate weight, and exercising regularly
greatly enhance a person’s health status. In general, the better
one’s overall health, the lower their healthcare costs.
There are increasing levels of preventive-orientated care:
◾ Screenings – The Affordable Care Act (ACA) expanded the

number of preventive services covered by health plans
required to be part of all plans. Among the 21 levels of
adult screenings now available under the ACA are choles-
terol, colorectal cancer, type 2 diabetes, falls, hepatitis B,
obesity, depression, and many others.1
◾ Relatively low-intensity interventional services – These
can be instrumental in staving off more serious conditions
down the road and could include:
– Free or highly subsidized care for minor physical or
mental health issues to catch these problems before
they get more serious
– Adequate prenatal care to support the delivery of a
healthy baby instead of one with signifcant health
issues
– Certain medications like low-dose aspirin for car-
diovascular disease and colorectal cancer, statins for
cardiac disease, hormone therapy for postmenopausal
women, and vitamin D and calcium for bone health –
Early administration of these medications can prevent
future, more serious problems.2
◾ Addressing something called the social determinants of
health – These are environmental elements that typically
adversely affect someone’s health. Things like unsafe
neighborhoods, food deserts, poor school systems, inad-
equate housing, poor air quality, and other factors are
associated with reduced health status and quality of life.
How far we as a society go in addressing these issues is a

prickly political question. As I mentioned, the ACA covers
many types of screening. Some people think the govern-
ment and private insurance companies should also pay for
the type of low-level interventions listed above. Others go
even further and suggest society is obligated to address the
social determinants of care that contribute to health disparities.

People of good will come down on all sides of the question of
how much preventive care should be offered.
Although there is ample evidence for the clinical value of
preventive care, not every intervention makes sense economi-
cally. It can take years for the clinical benefts of preventive
care to take hold, and people frequently change insurance car-
riers before the savings can be reaped by the insurance com-
pany that paid for it. This means an insurer could spend a
fairly considerable amount on preventive care for a patient
who might switch to a different payer the next year, well
before the health benefts blossom.
The following is reprinted from my blog posting at www.
pearsonhti.com dated December 19, 2017 that addresses this
issue:
The November 6, 2017 issue of Modern Healthcare featured
an opinion piece entitled “What’s behind America’s epic fail
on diabetes care” in which Editor Emeritus Merrill Goozner
describes recent efforts around public awareness, prevention
and treatment efforts, none of which seem to be having a
signifcant impact. He also asks a question that prompted me
to submit an idea that could potentially result in real improve-
ment for this and other prevention-oriented issues. Here is my
letter to the editor printed on December 4:
In Merrill Goozner’s article What’s behind America’s

epic fail on diabetes care (November 6) he astutely
asks, “In our fragmented insurance system where
people are constantly changing plans or aging into
Medicare, why spend money today when the ben-
efts will accrue to some other payer down the road?”
He’s exactly right under the current system.
However, here’s an idea. We know that some
preventive care is truly cost-effective if you look over
a multi-year horizon. Although I’m not normally a
fan of increased regulation, requiring all insurance
companies to cover those preventive services that are

known to be not only clinically effective, but also
cost-effective over time would eliminate the impact
of insurance churn. If Insurance Company A pays
for truly cost-effective preventive care for Patient 1
who subsequently moves to Insurance Company B,
it is just as likely that Patient 2 might switch from
Company B to Company A, thereby balancing the
economic scales. At that point, it becomes a market
share issue, introducing another element of competi-
tion where those insurance companies that achieve
the highest level of patient care and satisfaction come
out ahead through enrollee retention.
Of course, paying for additional preventive ser-
vices would result in short-term cost increases for the
overall system, but the benefts should balance out if
only those preventive services that are cost-effective
over the long term are covered.3
So, the idea is to identify which preventive services actually

make a difference medically and economically when consider-
ing total cost to the healthcare system over a period of several
years. Deciding what to cover would be tricky and controver-
sial, but pinpointing and paying for clinically and fnancially
effective services would be in the best interest both of patient
care and fscal responsibility.
Idea 2 – Revamp the Payment System to Create

a Public/Private Hybrid Approach
Determining whether or not healthcare coverage is a basic
human right is one of our most vexing health policy issues.
Those who say “yes” feel that it’s immoral to deny any-
one care. How can we see human suffering and ignore it?
Those on the other side highlight the economic challenges
and implications – including likely rationing – of providing

expanded care for all. They also point out that the rights enu-
merated in the United States Bill of Rights – life, liberty, and
the pursuit of happiness – have no societal “economic cost”
while providing care for others does.
In this contentious, polarized political climate, it’s
unlikely that either side will convince the other any time
soon. But, if I may be so bold, there may be an acceptable
compromise.
Before I present my idea, let’s consider three primary driv-
ers that brought healthcare coverage into the public’s con-
sciousness in recent decades.
1. Charges of hospital emergency rooms “dumping” patients

in the 1980s. As I pointed out in the last chapter, some
highly publicized cases where hospitals allegedly dis-
missed uninsured patients from EDs without properly
stabilizing and treating them caused understandable
public uproar and played a major role in passing the
Emergency Medical Treatment and Active Labor Act of
1986 (EMTALA).
2. People being denied coverage or having extraordi-
narily high premiums because of pre-existing medical
conditions
3. People literally being bankrupted by crushing medical
bills triggered by catastrophic medical crises
Here’s my proposal. What if we had a two-part hybrid

system?
◾ Part 1 – A national public plan that provided emergency/

preventive/primary care and catastrophic care for every-
one. It would be backed by a combination of increased
employer taxes and redeployment of some existing fund-
ing for Medicare, Medicaid, and the Children’s Health
Insurance Program.
◾ Part 2 – A reconfgured private insurance market that

offered coverage to fll the gap between emergency/
preventive/primary care and catastrophic care. This
supplemental insurance would be paid for either by
individuals who chose to purchase it or employers who
wanted to provide extra coverage for their employees.
Additionally, state Medicaid programs could help fll the
gap for Medicaid patients if they so desired.
This approach would address all three problems listed above.

It would:
◾ Guarantee everyone coverage for life-threatening

situations
◾ Keep pre-existing conditions from freezing people out
the insurance market for at least emergency/preventive/
primary care and catastrophic care
◾ Reduce the number of bankruptcies caused by cata-
strophic medical bills – The level where catastrophic
coverage would kick in – $20,000, $50,000, or some other
number – would be determined by the overall costs and
fnances of the program.
This solution has the added beneft of addressing the issue of

coverage for adult children under their parents’ health plans,
which proved to be a wildly popular feature of the ACA. But
my proposal goes one better because, unlike what happens
under the ACA, adult children would not be disenrolled from
the basic public plan when they turned 26.
Another beneft is that, since everyone would have access
to preventive and primary care, this approach should offoad
unnecessary ED traffc. If this proposal was combined with
my frst suggestion about identifying cost-effective preventive
approaches, it would also increase the likelihood of improved
long-term health status, potentially resulting in lower overall
societal costs.
Even though employers’ taxes would rise, their total health-

care spending probably would not. Their increased taxes would
be offset by decreased insurance premiums since they would no
longer have to pay for the emergency/preventive/primary and
catastrophic care they pay for in their current policies.
Perhaps one of the most important aspects of this concept
is that it maintains a place for private insurance companies,
which are understandably dead set against a fully socialized
program that would render them irrelevant. Any time the
idea of a single payer health system gets put on the table, the
private insurance market comes out in force to fght it tooth
and nail. Why wouldn’t they? Their very survival is at stake.
Although moving to this hybrid concept would greatly disrupt
the private payer market, payers would still play a signifcant
role in the new system.
The “healthcare is a right” group should be pleased that
everyone has guaranteed access to basic care, and those on
the other side should see this as a more affordable option than
all-out, expensive full coverage for everyone.
Some might complain that this concept would establish a
two-tiered system since not everyone would have the supple-
mental private coverage. But I would argue that in a free
society, not everyone accesses the same products and services.
That’s why we have both Econo Lodge and Ritz-Carlton hotels.
Furthermore, our current system does not adequately care for
the needs of the “have nots,” many of whom get almost no
care at all. This change would at least be a good step toward
more equity.4
I should point out that this plan would not involve expand-
ing Medicare and it is certainly not a Medicare for All (M4A)
plan. The existing Medicare program would stay pretty much
as it is. Although – as I described in Chapter 1 – Medicare
does not fully cover the cost of care it “orders,” it works pretty
well operationally, and politicians recognize that upsetting this
program would be as wise as storming the gates of hell with a
water pistol.
Idea 3 – Revamp the Payment System to Better

Refect Patient’s Likelihood to Need Healthcare
Services and to Better Incentivize Them
Quick quiz: Who has primary responsibility for healthcare cost
containment?
a. Government
b. Hospitals
c. Physicians
d. Insurers
e. Patients
Trick question. The answer is “(f) All of the above.” Since cost
increases stem from many sources, any successful solution
must address them all. Unfortunately, many approaches just
focus on (a), (b), and (c) – government regulation or cutting
providers’ payments.
In 2003, former Speaker of the House of Representatives
Newt Gingrich founded a think tank-type group called the
Center for Health Transformation designed to examine the cur-
rent healthcare system and suggest creative ways to revamp it
to improve care while also saving money. I was privileged to
serve on one of its committees and had a fash of inspiration
during one of our meetings. This was my idea.
What if the industry developed a customized index that
accounts for various factors that determine someone’s expected
level of health services consumption – sort of an individualized
health status FICO® score? Financial FICO scores run information
about a person’s income, debt load, payment history, and other
factors through an algorithm that generates a single number to
rank-order individuals’ likelihood to meet their credit obligations.5
Factors for the Health FICO (HFICO) would include age,
gender, race, family history, biometrics, wellness behaviors,
and potentially others. A few healthcare technology compa-
nies are starting to develop health FICO scores, primarily for
wellness purposes and to provide additional insights for clini-

cal care. But my idea goes two steps further.
The frst involves using the HFICO for risk rating of patients
for insurance premium purposes. The age-old challenge in
determining premiums for any type of insurance is accurately
predicting the likelihood that the individual being insured
will indeed encounter the problem being insured against
and, therefore, generate a claim and cost the insurer money.
Current risk-rating approaches use various factors but are still
somewhat crude. For example, the premium rates for people
who buy individual insurance under the ACA are determined
using only the following considerations:
◾ Whether coverage is for an individual or a family

◾ Their geographic area
◾ Their age
◾ Whether or not they use tobacco6
The age rating for adults can only vary by a factor of 3:1. For
example, if a 21-year-old male’s monthly premium for a par-
ticular plan is $250, a 64-year-old male’s premium for the same
plan can’t exceed $750.7
The HFICO score would be far more granular and, as men-
tioned above, could potentially add:
◾ Gender
◾ Race
◾ Family history
◾ Biometrics
◾ Wellness behaviors other than tobacco use
The HFICO score would be used to determine the premium

amount for each individual based on all these elements. The
higher the score, the lower their risk of needing healthcare
services. Therefore, the insurance company would be assum-
ing less risk, allowing it to charge lower premiums. Conversely,
the lower the HFICO, the more likely that the individual would
need care, and the insurance company would receive a higher
premium to offset the added risk.
Many feel insurers “cherry-pick” and try to enroll only the
healthiest people. Payers are, understandably, more interested
in attracting enrollees who are less likely to require services
than those with high expected care needs. Under the current,
rather unsophisticated system, low-risk enrollees are typically
more proftable. Some insurance companies sponsor enroll-
ment meetings at places like health clubs so they can meet
people who have demonstrated a certain level of commitment
to staying healthy.
The idea behind the HFICO is to fnely tune the premium
attached to each individual based on factors known to affect
average risk levels. This would theoretically make everyone
equally attractive fscally to payers. The premiums they would
receive for enrollees with low HFICO scores would be actuari-
ally set to, on average, make them as potentially proftable as
enrollees with high scores, thus neutralizing the incentive to
cherry-pick.
But there’s a second way to potentially make a HFICO pro-
gram even more effective. Besides theoretically “equalizing”
the attractiveness of each potential enrollee to payers, it could
also become a mechanism to draw in one of the largest “play-
ers” in the escalating health cost equation: the patient.
In 2007, The New England Journal of Medicine included an
article called “We Can Do Better – Improving the Health of
the American People” by Steven A. Schroeder, MD. The author
cites Centers for Disease Control and Prevention research that
examines what it calls “Proportional Contribution to Premature
Deaths.” Put in plain English, this studies why do people die
sooner than they “should.” Examining potentially avoidable
deaths can be used as a surrogate for determining health
status.
As shown in Figure 3.1, the single most signifcant contribu-
tor to someone’s health status – with a 40% impact – is the
Figure 3.1 Proportional Contribution to Premature Deaths.

Source: New England Journal of Medicine 2007:1221-8.
lifestyle choices they make. At 30%, the second highest factor

is someone’s genetic predisposition.
If these statistics are valid, fully 70% of someone’s health
status is virtually untouched by current policies. Congress can’t
change my genetic makeup, and, to date, there have been few
effective programs that signifcantly address lifestyle choices.
As I mentioned previously, cost-cutting efforts typically turn
to more regulation or cutting provider payments. Although
we should pull all the levers – including those – if we can’t
do anything about the 30% hard-wired in our genes and we
choose to ignore the 40% potentially addressable by changing
people’s behavior, we are trying to solve 100% of the health
status and cost problem the back of the remaining 30%. How
likely is that to succeed?
Here’s how patient engagement would work. Just as my
FICO score determines my credit-worthiness and, therefore,
my cost of borrowing money, my HFICO score could be used
to incentivize me through rewards like lower premiums or
enhanced benefts. If I follow recommended improvement
practices, I would receive actuarially based credits to offset my

out-of-pocket expenses. These could take the form of sig-
nifcant premium reductions, greatly reduced copayments, or
sizable contributions to an account from which out-of-pocket
expenses could be reimbursed. Whatever form these incen-
tives took must be meaningful.
I was once in a health plan that tried to entice people to
get a “house call wellness visit” by offering a $15 gift card to
one of the big box stores. Even though $15 might convince
a few to spend the half hour necessary for the house call
wellness visit, it isn’t likely to convince too many people to
implement whatever lifestyle changes they discuss during the
wellness visit. On the other hand, something like a $60–$100
per month premium reduction or some other equally attrac-
tive bonus might do the trick and give enrollees real motiva-
tion to modify their habits.
This is extremely important! Under a HFICO plan, the only
elements to include in determining patients’ incentives must
be factors completely under their control. When it comes to
rewards, things like age, race, and family history would be
strictly off limits. Although the fact that my father died of a
heart attack at age 50 would be factored into my HFICO score,
that would not be allowed to be considered when establishing
my fnancial incentives.
Another thing, fnancial consequences should be pre-
sented as rewards not penalties. Back in 2011, the State of
Arizona attempted to give Medicaid patients a reason to
improve their lifestyles by imposing a $50 per year penalty
on any enrollee who was diabetic and smoked and who also
failed to follow a physician-supervised weight loss plan. The
program correctly recognized that people’s choices directly
translate into utilization and therefore cost. But the initia-
tive was immediately met with hostility and scorn and was
labeled a “cruel and regressive fat tax” and dubbed “Arizona’s
fab tax.”8
There were three things wrong with Arizona’s approach:
1. Opponents to the plan complained recipients would be

punished for things they couldn’t necessarily completely
control.9 This allegation validates the point I just made
about assuring that the HFICO must in no way penalize
people for things they can’t change.
2. Although Medicaid enrollees are by defnition low income
and would “feel” a $50 a year penalty, it may not be
enough to motivate behavioral change. With cigarettes
costing somewhere around $6 a pack, a pack-a-day
smoker spends more than three times the annual penalty
every month. Would the extra $4.17 a month hit ($50 a
year divided by 12 months) be enough to convince any-
one to lose weight? I doubt it.
3. The most serious mistake in my mind is that the pro-
gram was presented as a negative rather than a positive.
Instead of “taking something away” or punishing some-
one, Arizona should have offered a positive incentive
like offering no-cost dental coverage for complying with
the changed behavior or some other beneft. The actuar-
ies would have to rejigger the overall Medicaid program
numbers to add the beneft while still arriving at the same
total program cost, but that is entirely possible.
Initial reaction to my HFICO concept at the Center for Health

Transformation committee meeting was positive, and I have
had the chance to share it with several people since then. So
far no one has identifed a fatal faw. In fact, one economics
professor called it a brilliant idea.
However, there are several cautions:
◾ One of the toughest aspects would be crafting the algo-

rithm that determines the HFICO. All “artifcial” indices
involve arbitrary decisions. For example, how much weight
should be given to smoking cessation vs. exercise vs. body

fat metrics? And how much exercise would be necessary
to qualify for the incentive? Should the thresholds be age-
adjusted? No matter how much the designers try, some
people will always come out on the wrong side of the
methodology ultimately selected. Therefore, a great deal
of research and discussion would be required to estab-
lish reasonable standards and algorithms. Furthermore, a
process for regularly revising and updating the underlying
methodology would necessary to take advantage of lessons
learned as the program rolled out.
A hospital CEO friend of mine observed that the HFICO
approach would parallel to the golf handicap system as a
way to level the playing feld so two very different golfers
can play together. He commented, “It’s taken a few hun-
dred years for golf to fgure out this system, and players
are still arguing on the frst tee at courses around the world
every day.” But the concept is valid: fnd a way to “equal-
ize” the inputs to allow you to move forward in a fair way.
◾ I fully realize how potentially infammatory folding race
and ethnicity into the HFICO equation could be. With the
current hyper-sensitivity around racial issues, some might
view including race as somehow discriminatory against
minorities. In reality, it would actually be the opposite
if done correctly. Taking into account things like social
determinants of health – including diffculty in obtaining
healthy food, living in unsafe neighborhoods, and having
limited literacy – would lower the person’s HFICO score.
Whoever covered that person would get higher premium
payments, making it more likely they would be actively
courted as potential enrollees.
◾ Having a single, very personal number like the HFICO
could be considered an invasion of privacy. The same
might be said about the fnancial FICO score. Of course,
the highest levels of data security should be required for
both the fnancial FICO and the HFICO scores.
Also, keep in mind that both numbers are generated

by complex algorithms that are not generally available to
the public. The unexpectedly low fnancial FICO score
of a person who otherwise appears fnancially success-
ful could be caused by several factors. If their FICO score
was hacked, it would be impossible to determine if the
lower score was due to a bankruptcy, over-extension
of credit, poor payment history, or some other reason.
Of course, the individual wouldn’t want the FICO score
disclosed at all, but just knowing someone has a low
number doesn’t provide much meaningful or specifc
information.
The same would be true of the HFICO. Since higher
age would automatically lower the HFICO, part of a lower
number for an older would be attributable to that. Also,
an unfortunate family medical history would lower the
score, and few people know much about their friends’ and
colleagues’ family medical histories unless they choose to
disclose them. So, knowing someone has a low HFICO
does not necessarily reveal any specifcs of their circum-
stances or behavior. And if there was major concern over
confdentiality, the HFICO could potentially be brought
under coverage of the Health Information Portability and
Accountability Act (HIPAA), the federal program that
requires strict guarding of protected health information.
◾ Some might fear that a poor HFICO score could price
people with individual (as opposed to employer-provided)
coverage out of the insurance market. This issue could
be addressed by placing a cap on total premium level
paid by individuals not in group plans. Perhaps some of
the current high-risk subsidy funds could be transferred
over to the HFICO-based approach. This would protect
individuals with very low HFICO scores from exorbitant
premiums.
◾ Another potential problem is the possibility of someone
not receiving a job offer if the hiring company feared
bringing in a high-risk individual would raise their group

premium amounts. Health status is not supposed to be
considered in employment situations today, and this
would not change. Regulations could be tweaked to pro-
hibit refusing employment based on someone’s HFICO
score. Discrimination can be tough to prove, but there is
ample precedent for effective anti-discrimination policies
based on other factors like age, gender, and religion.
By building in meaningful fnancial incentives for the individ-

ual based only on lifestyle decisions completely within their con-
trol, implementing a HFICO approach would be a great frst
step to crack the nut of the 40% of health status attributable to
patients’ health-related choices. And this approach could bring
us closer to the quiz answer “(f) All of the above.”
Final Thoughts
Most cost-control efforts amount to tweaking the existing sys-
tem and usually take the form of provider payment cuts (think
back to the HealthLeaders analysis I cited in Chapter 1 esti-
mating hospital margins cuts of between 16% and 22% if M4A
were implemented), some kind of price controls, or efforts to
increase price transparency and competition. All these have
their place, but to borrow a colloquial phrase, they amount to
slapping lipstick on a pig. They don’t address some underlying
failings of our current system.
As disruptive as the ACA was, its biggest impact was largely
just rearranging who pays for health insurance and the mecha-
nism for how it’s paid. Despite some modest preventive care
elements and a few enhanced programmatic aspects sprinkled
in, at its core it still preserves the fundamental insurance
industry model. On the other hand, the three proposals in this
chapter suggest reformulating our entire approach to health
insurance by ushering in truly effective preventive care, by
addressing a huge gap in our current coverage approach,
and/or by encouraging patients’ meaningful engagement in the

care equation.
Everyone who has attempted to recalibrate this huge part of
our national economy quickly concludes that it is a monumen-
tal, enormously complex task. I fully recognize this. To reiterate,
these are broad-based discussion concepts that need extensive
additional thought and discussion. And, although here may be
ways to combine elements from each of these ideas, I am not
saying they must all be implemented in tandem.
Much research would be required to fne-tune these ideas
and develop detailed operating principles to make them really
workable. Given the dysfunctionality of the current system,
something must change, and I personally think we should at
least introduce these concepts for public discourse. There’s
too much at stake to not try to bring about some needed,
common-sense changes.
End Notes
1. https://www.healthcare.gov/preventive-care-adults/, accessed
March 28, 2019.
2. https://www.uspreventiveservicestaskforce.org/BrowseRec/
Index, accessed March 28, 2019.
3. This citation is from my December 19, 2017 blog posting at
www.pearsonhti.com.
4. This section is adapted from my July 13, 2018 blog posting at
www.pearsonhti.com.
5. https://www.fco.com/en/products/fco-score, accessed March
29, 2019.
6. Coventry Health Care, “The Affordable Care Act: Rating
Factor limitations,” http://coventryhealthcare.com/web/groups/
public/@cvty_corporate_chc/documents/webcontent/c084481.
pdf, 2013, accessed March 29, 2019.
7. ibid.
8. “Arizona’s ‘cruel and regressive’ fat tax,” The Week, April 2011,
accessed April 5, 2019.
9. ibid.
Chapter 4
The Six Fronts of the

Healthtech Revolution
We are in the midst of an unprecedented transformation in

healthcare delivery. Thousands of new medical devices, sci-
entifc breakthroughs, analytical methodologies, health-related
apps, and other innovations are introduced each year. Every
successful new product or approach has the potential to either
revolutionize the lives of a particular group of patients, help
streamline operations, or introduce operational effciencies
that beneft everyone. Some can do two or even all three of
these.
If we look back to care in the 1970s, we can see how much
has changed. Among the incredible clinical advances of the
last four decades are the following:
◾ Magnetic resonance imaging (MRI)

◾ Laparoscopic surgery
◾ Robotic surgery
◾ Teleradiology
◾ Cardiovascular implants
◾ Bionic limbs
◾ DNA sequencing
67
◾ Genomics
◾ Wearable technologies
These have changed the lives of millions of patients and they

feed into a stream that continues to transform many aspects
of the feld. (Unfortunately, they won’t address the underlying
payment-related problems outlined in Chapter 1.) Later in this
chapter, I will sketch out an exciting picture of what the future
of care delivery might look like because of continuing health-
tech breakthroughs.
This chapter covers a lot of territory. Here’s what we will
look at:
◾ Why healthcare is behind other industries in adopting

technology
◾ Why this is changing now
◾ The explosive growth in healthcare technology
◾ Categorizing healthcare technology
◾ The six fronts of the healthtech revolution
Why Healthcare Is Behind in Adopting

Non-Clinical Technology
All the technology breakthroughs of the last four decades
listed above are clinical, not business- or process-oriented. The
healthcare feld is universally recognized as being woefully
behind almost every other industry in terms of its adoption of
non-clinical technology. There at least two reasons:
1. The complex, splintered nature of the healthcare feld

Unlike manufacturing, retail, or hospitality industries,
healthcare involves frequent, complicated interactions
among various organizations, which are seldom aligned
or integrated. All technology needs within the hospitality
The Six Fronts of the Healthtech Revolution ◾ 69
industry, for example, are fairly straightforward. Hotels

must process reservations, communicate with banks for
payments, reach out to customers with pre- and post-stay
communications, order supplies, handle human resources
issues, and deal with many other transactions. However,
many of these functions are pretty much self-contained
with less need for real-time data exchange than in health-
care, where different players must interact every day.
Patient care requires trading data among physicians,
hospitals, other clinicians, pharmacies, nursing homes,
hospice programs, insurance companies, and others. Over
the decades, each of these areas developed its own infor-
mation systems with little recognition that someday in the
future, they may need to communicate with each other.
Hospitals use the Electronic Health Records (EHRs) to
collect detailed clinical information throughout an inpa-
tient stay or outpatient encounter, but few EHRs were
designed with the goal of transmitting data to, say, a
nursing home’s IT system. Making matters worse, there
are many stand-alone IT systems and “data islands” even
within a hospital itself. Historically, many hospital out-
patient clinics, labs, imaging departments, pharmacies,
billing offces, and other areas had their own IT systems,
few of which followed universal data transfer protocols.
Furthermore, various system use different code sets:
ICD-10-CM diagnosis and condition codes, SNOMED
Clinical Terms, Diagnosis-Related Groups (DRGs), Current
Procedural Terminology (CPT), Healthcare Common
Procedure Coding System (HCPCS), genomic classifcation
sets, state-defned classifcations required for reporting
discharge disposition and other aspects of an inpatient
stay, and many other classifcation systems. Not all these
code sets have to interact, but ideally some should.
The reality that none of these was designed with the
thought of eventually trading data with other internal sys-
tems is not a criticism of their designers’ efforts as they
defned the code sets. Rather, it refects the fact that their
primary objective was creating a robust classifcation
system for use within their own domains, not setting the
stage for future interoperability among various databases.
Because most of them grew up independent of each
other, interfaces, crosswalks, mapping, and other com-
munications considerations are far more complicated than
they would be had they be developed in tandem with
each other.
There are also data challenges when trying to combine
data even within the same functional area or when trying
to track the same data in different databases. I saw this
frst-hand about 20 years ago when I led the data area
at GHA. GHA is the keeper of the statewide discharge
database that tracks every inpatient discharge from every
hospital in Georgia. Another organization maintained a
different health-related database, and we were discussing
possibly combining them. But we quickly recognized the
challenge involved.
One of the data felds we both collected was the
patient’s race, but as I recall, we had six categories but
the other group had only fve. Combining these retroac-
tively is impossible since we had different defnitions and
delineation points. I don’t remember the details, but let’s
say GHA had six categories:
– Asian
– Black or African American-American
– Hawaiian or other Pacifc Islander
– Mixed race
– Native American
– White
If we decided to merge the efforts going forward, we
would have to make a decision about which classifcation
approach we would use in the future, GHA’s or the other
group’s. That’s a simple programming decision. However,
there is no way to retrospectively combine the historical
databases to use for meaningful analysis. If a mixed race

record was in both databases and the other group didn’t
list mixed race as an option, that record would show up
as mixed race in the GHA database but could end up in
any one of the other fve categories in the other data set.
We can’t know how they assigned it.
If we were starting with the historical GHA data set
and wanted to develop a crosswalk between GHA’s six
categories and the other organization’s fve, what would
we do with records in GHA’s mixed race group? Should
we consider them all White? All Black? Or something else?
Would we just divide them out equally or proportionally
into the other group’s fve categories? Any way we would
do this would introduce inaccuracies and/or inconsisten-
cies between the two data sets.
And the problem goes the other way too. If we tried
to combine the historical data sets starting with the other
organization’s fve categories and moving them to GHA’s
six, no records from the other database would be classi-
fed as mixed race in the GHA database. There’s no way
to tease out where a mixed race record ended up in the
other database since that detail was lost when the record
was entered into one of the other group’s fve categories.
Once a record is assigned to one of its fve buckets, back-
ing out mixed race records is impossible.
This is a small example of the many complexities we
faced as we considered how to combine databases. We
ultimately abandoned the effort. Our failed exercise illus-
trates the diffculty of cross-walking historical data when
various data sets were developed in isolation from each
other. And healthcare is flled with such databases.
People who fail to grasp these complexities some-
times simplistically criticize the healthcare industry about
our inability to exchange data. There is an analogy that
has “made the rounds” for more than a decade. It goes
like this.
The speaker says, “I was in Madrid last month and I

was able to use an ATM there to withdraw money from
my bank account back in Atlanta. If I can get money
from halfway around the world, why can’t I get my medi-
cal record across the street from my doctor’s offce to the
hospital?”
Here’s the problem with this analogy. The speaker
assumes the impediment to data transfer is geography.
Atlanta and Madrid are pretty far apart. But the problem
isn’t distance. It’s the transaction complexity and the struc-
ture and defnitions of the databases you are accessing.
I myself have used ATMs in Madrid to get Euros. Once
I’m authenticated, I simply push a button on the screen to
request a certain amount and then my money appears. All
the banking system has to do is verify that I have enough
in my account back in Atlanta to cover the request and
then I get my money. There are only three steps involved:
converting my request for so many Euros to dollars,
verifying that I have enough dollars to cover the request,
and then subtracting the dollar amount from my account.
That’s about as simple as it gets.
By contrast, trying to exchange healthcare data is inf-
nitely more complicated. There are all kinds of potential
issues: data security requirements, technical interfaces,
data compatibility, data defnitions, data mapping, data
integrity, and data latency. Add to this the fact that not
every provider in the entire stream of my care is nec-
essarily even connected to all the other elements. For
example, I may be admitted to Hospital A but may have
a specialist at Hospital B which uses a different EHR
that cannot trade data with Hospital A. So, Hospital A
will not be able to electronically collect my specialist’s
physician notes. Nor will my specialist be able to access
Hospital A’s discharge summary. And my home health
provider may have limited IT capabilities and be unable
to connect with any outside organizations at all. This
example makes it clear that when I’m dealing with com-

munications within the healthcare world, I am trying to
do a whole lot more than get a few Euros from an ATM
in Spain.
A more apt comparison would be if I could use the
ATM to do the following: update my federal and state
income tax payroll withholding amounts, check the bal-
ance in the 401(k) plan at my independent investment
brokerage, check my mortgage’s escrow account balance
with a commercial lender not affliated with my bank,
pay my water utility bill, and transfer money to one of
my kids’ accounts at their local credit union in California.
This begins to approximate the complexity of getting my
medical record across the street.
So, yes, there is a good reason I can withdraw cash in
Spain but not get all my medical information across the
street.
2. The expense
Technology is not cheap. Developers and entrepre-
neurs typically invest years designing their new products
and devices. The Food and Drug Administration (FDA)
approval process is lengthy and can be very expensive.
Not every device or pharmaceutical product has to go
through this step, but if they do, the medical device and
pharmaceutical companies have to recuperate consider-
able overhead costs. Consequently, clinically oriented
products usually carry hefty price tags. Given the fnan-
cial challenges I outlined in Chapter 1, health systems
have to carefully weigh each of their expenditures.
Funding for patient-care technology is in competition with
nonclinical technology – and a whole lot of other things
– and sometimes the scales are tilted toward clinical tech
applications.
Why Are Things Changing Now?

Despite the impediments listed above, we have witnessed in
recent years an encouraging uptick in healthcare’s adoption
of non-clinical technology. Many healthcare accelerators and
incubators have popped up all over the country, and numer-
ous new companies have developed gangbuster products.
There are several reasons for this impressive growth:
◾ The rise of the Internet in the late 1990s – The Internet’s

transformational impact on the business world hasn’t been
lost on healthcare technology developers. If vast improve-
ments happened in general commerce, they can happen
in healthcare too.
Perhaps the Internet’s most important impact is the
shift in mindset and expectations. We have learned that
it is possible to conduct almost any kind of transaction
electronically from almost anywhere in the world. Whole
industry groups – like telephone directory publishers,
travel agencies, map-making companies, toy stores, record
shops, and book stores – have been decimated by the
Internet. When was the last time you reserved a fight or
hotel room through a travel agent? The public expects –
no, demands – to conduct more and more business
online, and we get annoyed if we go to a site advertising
any type of consumer product and it doesn’t allow an
immediate online purchase. Although healthcare is notori-
ously behind other industries, it is catching up, and more
and more retail-type transactions like booking appoint-
ments and paying bills are becoming the norm.
◾ The explosion of smartphones and tablets – Media Tech
Reviews reports that there were 224.3 million smartphone
users in the United States in 2018 and the number is
expected to grow to 270.7 by 2022.1 Statista states that
53.8% of the US population owned a tablet in 2018.2 As
in the case with the Internet, these users expect instant
communication with every important organization they

deal with, including their doctors and health systems. This
greatly ups the demand for communications technologies.
◾ The care environment migrating toward population health
management, value-based purchasing, and bundled
payments – In order to support the new demands create
by these signifcant changes in the payment and delivery
environment, provider and patients alike need immedi-
ate access to relevant health data. It is virtually impossible
to maximize quality, coordinate care, reduce costs, man-
age resources, comply with regulatory requirements, and
operate under the new fnancial realities without tapping
into the emerging technologies that were not around even
fve years ago. This dynamic has spawned hundreds of
phone and tablet apps that track patients’ progress and
alert caregivers when intervention might be needed.
◾ Cloud storage and Software as a Service (SaaS) hosting
– These breakthroughs have made it far easier for health-
care organizations to conveniently store data and ensure
that each user within the organization has the very latest
version of each application.
◾ The availability of more robust Internet bandwidth – The
fact that 5G technology offers download speeds 10 to
100 times faster than 4G is encouraging some healthcare
organizations like Rush University System for Health to
become a “5G-enabled hospital.”3
Explosive Growth
These forces are coalescing to create a climate of unprec-
edented growth for healthtech, and all indicators point to this
upward trajectory continuing and even accelerating. Consider
these statistics and factoids:
◾ The total digital health market is projected to grow from

the 2016 level of $179.6 billion to $536.6 billion in 2025.4
◾ The market for precision medicine alone (which is

explained later in this chapter) is expected to exceed
$96.6 billion by 2024.5
◾ Although venture capital (VC) investments in healthtech
have fattened a bit in recent years, the projected level of
2017 VC investments was three times what it was in 2012.6
The top three digital health areas receiving VC funding
in 2016 were genomics and sequencing, analytics and Big
Data, and wearables and biosensing.7
◾ There has been a dramatic shift in the amount of VC
going into digital health vs. more “traditional medtech”
(devices, etc.). In 2011, traditional medtech received
2.68 times more Series A funding than did digital health.
By 2016, the relative proportions had fipped and digital
health got 1.75 more than traditional medtech.8
◾ There are currently at least 325,000 mobile health apps.9
◾ An estimated 245 million wearable devices will be sold
in 2019, making it a $25 billion industry.10 The advertising
spending alone for wearables is projected to reach $68.7
million in 2019.11
◾ According to Liquid State, “Mobile has become the default
technology for patient engagement.”12
◾ Blockchain technology is widely anticipated to hit the
healthcare market in a big way. LDJ Capital Chairman
David Drake recently commented, “The healthcare indus-
try is booming with innovations like the blockchain-
powered technologies for the past few years. I think the
trend for coming years will be healthtech protocols paired
with blockchain tech and crypto . . . .”13
◾ Seeing the growing impact of mHealth, several large
health systems have developed their own healthtech incu-
bators, are partnering with start-ups, and/or are establish-
ing venture funds.
Research 2 Guidance (R2G) is a German-based organi-
zation that supports businesses that develop digital health
products through market research, competitor insights,
and strategy advice. R2G facilitates partnerships “between

best-in-class innovators and established healthcare com-
panies and help(s) them to align their service offerings
and business models.”14 One of its hallmark publications
is mHealth Developer Economics: Connectivity in Digital
Health billed as “the largest research program on mHealth
app publishing.” Highlights from the November 2018
version of the report give glimpses into the current and
future state of the healthcare app world and predict that
integration and the expanded use of sensors will continue.
◾ Forty-nine percent of mHealth app publishers are cur-
rently integrating EHRs into their mobile apps.
◾ Rather than merely being repositories of health data,
future EHRs will incorporate Artifcial Intelligence (AI)
which will offer care recommendations to clinicians.
EHRs will also transmit appropriate data to public health
reporting systems.
◾ Moving forward, medical devices will be the most impor-
tant category (at 65%) for sensor integration, while wearable
devices (at 52%) will also be relevant integration points.
◾ Built-in sensors will be accessible in various types of
devices:
– Smartphones and tablets – for use as accelerometers
and for taking heart rate measures and will also be
installed in phone cameras
– Wearables – such as bracelets, helmets
– Plugged-in or wirelessly connected devices – such as
blood glucose meters, thermometers, and blood pres-
sure meters
– In-body implantable sensors – used to detect glucose
levels for diabetes control
– Intimate contact items – such as stick-on tattoo
sensors15
In January 2018, Amazon, Berkshire Hathaway, and JPMorgan

Chase created a huge stir in the healthcare community by
announcing the formation of a not-for-proft entity (subse-

quently dubbed Haven) with the mission of taking on “the
hungry tapeworm” of soaring healthcare costs. Technology
will play a big role in this initiative. Although its frst target
group is the three organizations’ one million employees, any
signifcant breakthroughs could clearly serve as models for
other companies and could potentially end up benefting
all Americans. The formation of Haven was one of the most
signifcant healthcare stories of 2018. The New York Times
reported that the initial announcement of Haven’s formation
“landed like a thunderclap – sending stocks for insurers and
other major health companies tumbling.”16
Partially as a response to Haven, Apple announced it’s
developing its own tech-enabled clinics for Apple employ-
ees. This is a logical extension of Apple’s health-related
focus that began with the 2014 introduction of its HealthKit,
an Application Programming Interface (API) for develop-
ers of health-related apps. Since then, the company has
launched or used several different platforms to enable con-
necting health data across various apps and for use in clini-
cal research.17
As I was putting the fnal touches on this book, speculation
was growing that the Amazon/Berkshire Hathaway/JPMorgan
Chase and Apple initiatives might join forces. Having Apple
link up with Haven would close two gaps by Apple’s being
able to provide the following:
◾ The ability to continuously monitor biometric data

◾ A data aggregation platform for health information which
could form the basis of new services18
Who knows where all this will lead? But anytime you hear the
words “Amazon,” “Apple,” and “technology” in the same con-
versation, it’s a safe bet something big will likely result.
And it even gets wilder. Automobile magazine recently
ran a story called “The Big Data Boom” featuring incredible
tech-driven automotive breakthroughs and predicting the

connected car will change the industry. Self-driving cars are
generating a lot of buzz these days, and according to this
article, a fully developed autonomous vehicle is expected to
generate 100 gigabytes of data every second! In the future
sensors will collect data from engines, transmissions, brakes,
and even windshield wipers and be able to use the result-
ing data combined with other data sources for traffc con-
trol purposes, to predict the location of black ice, to offer
location-based special offers (like a free cup of coffee at
Dunkin’ Donuts), to fnd a parking spot, and even to sup-
port law enforcement if offcials can overcome likely privacy
concerns and have the ability, say, to access the cameras of
all the vehicles in a particular area that just suffered a terror-
ist attack.
None of this pertains directly to healthcare, but this story
goes on to report there are medical applications for other car-
based sensors. One company is working on what it calls an
Active Wellness chair that will measure heart rates and respira-
tion to be used by a system designed to help alleviate driver
drowsiness and stress. Ford has developed a steering wheel
that tracks pulse rate and other vital signs, and, as the author
says, “it’s not diffcult to imagine how valuable biomedical data
would be to a driver’s doctor, health insurer, or a pharmaceuti-
cal company.”19
Motor Trend magazine reports on an Israeli company
with technology that accesses information from a car’s
onboard technology and sensors active during an accident
to predict the likely severity of passenger injuries. This data
is transmitted to frst responders so they have a better idea
of what to expect upon arrival. And if the projected injuries
are serious enough, a medevac unit can be immediately dis-
patched even before the ambulance arrives with the emer-
gency medical technicians. This can save precious minutes
and potentially many lives.20
Wild indeed!
Categorizing Healthcare Technology

Usually, when I tell people that I help technology companies
with their strategies for selling into the healthcare world they
say, “Oh, so you work with EHRs.” Well, no, not really. Most
EHR companies have been around long enough to have pretty
much developed their strategies, while many of my clients
are earlier in their growth cycles and are still developing their
understanding of the feld and their strategies.
I’ve had this conversation enough times to make me to
want to fgure out why people assume that I work mostly
with EHR companies. I think I know why. Because of federal
mandates and funding for EHRs) through the Medicare Access
and CHIP Reauthorization Act (MACRA) and the 21st Century
Cure Act, EHRs have been the most visible technology in
recent years. However, healthtech includes a whole lot more
than EHRs: everything from mobile phone apps to the Internet
of Things (IoT) to implantable devices to Artifcial Intelligence
(AI) and all other kinds of things in between.
Whenever I approach a complicated subject, I fnd it helpful
to look for patterns and themes so I can create a framework to
categorize disorganized and potentially confusing material. This
led me to think of healthcare tech in two very broad buckets:
1. Traditional technology
2. Everything else – specifcally emerging, disruptive, and
transformational technology
Allow me to elaborate.
There are three main services within my “traditional”
category:
1. IT infrastructure
2. Complying with the Health Information Portability and
Accountability Act (HIPAA) concerning protection of
Personally Identifable Information (PII)
3. EHRs
This might seem like an odd grouping. It’s easy to recognize

IT infrastructure as traditional technology. Even the smallest
physician practice must have some sort of computer capability,
and that means they have an IT infrastructure.
But why would I consider the other two traditional? After
all, HIPAA is not even a technology product. It’s a federal
law that governs the safeguarding the privacy of patients’
health information. (Other countries have corresponding
laws concerning PII protection.) Creating a secure IT infra-
structure is an obvious competent of every HIPAA compli-
ance plan, so the CIO typically plays a central role on the
HIPAA team. And to most people, the CIO equals technol-
ogy. Therefore, HIPAA is often seen largely as a technology
issue.
Regarding EHRs, just like IT infrastructure and HIPAA com-
pliance, they have essentially become a cost of doing busi-
ness for anyone in healthcare. Modern Healthcare recognized
this in a 2017 article entitled “Á disruptor becomes the norm”
where they called EHRs “a ubiquitous and necessary part of
both the provider and the patient experience.”21 I don’t suggest
that EHRs are fully mature. They have a long way to go and
will continue to evolve. My point is that the healthcare ecosys-
tem has already recognized EHRs as part of the new reality
and, in that sense, they are no longer revolutionary.
Interestingly, there may soon be a fourth category labeled
“traditional” and considered to be expected. And that is tele-
medicine, defned as physician consults conducted via tech-
nology. Telemedicine may be reaching the point of becoming
an expectation rather than a novelty. Modern Healthcare’s
March 25, 2019 cover story was called “Use it or lose them”
and describes how some patients may begin to migrate away
from providers without telemedicine capabilities.22
So, IT infrastructure, HIPAA compliance, and EHRs (and
perhaps telemedicine) are woven into the fabric of today’s
healthcare delivery world. Most of their impact on healthcare
has already been baked into the system. Even though EHRs
continue to be tweaked, the many positive changes they offer

are already factored in.
This is like what sometimes happens to the stock market
when the Federal Reserve raises interest rates after leaving
them alone for a couple of years. The markets often react
negatively when interest rates increase, but sometimes they
don’t. When they don’t, expert analysts explain that the mar-
kets had been expecting a rate increase for many months
and maybe were even a bit surprised that it hadn’t happened
sooner. So, when rates did increase, they weren’t surprised
and had already considered that move into their expectations.
As a result, the markets pretty much yawn.
It’s the same with these three aspects of technology. The
bulk of their impact has already been absorbed into the deliv-
ery system. Another way of saying this is that you can’t oper-
ate without all three of them. None of them is a “marketing
talking point.” Just like no hospital touts in its advertisements,
“Come to our hospital because we have elevators,” neither do
they say, “Come to our hospital because we have EHRs.”
So that’s traditional technology.
I call the second major category, “emerging, disruptive,
transformational technology.” This is where all the excit-
ing innovation is happening but it’s a little hard to precisely
defne. Different people apply the following terms to this
grouping: telemedicine, telehealth, digital health, mHealth,
mobile health, virtual health, and maybe even a few other
terms.
Regardless of what you call it, here is a partial list of
emerging, transformational technology applications:
◾ Smartphone peripheral plug-ins for measuring blood pres-

sure, takings electrocardiogram (EKGs), etc.
◾ Big Data
◾ AI
◾ Predictive analytics
◾ Precision medicine/personalized medicine
◾ Wearable technologies
◾ 3-D printing
◾ Expansion of genomics and DNA sequencing into routine
care decisions
Unlike IT infrastructure, HIPAA compliance, and EHRs, many

of these are the objects of marketing campaigns.
You can see how varied the new offerings are. Smartphone
peripheral plug-ins have almost nothing in common with
DNA sequencing, yet they are both part of this revolution. To
get my arms around these wildly varying elements, I decided
to look for organizing principles to better understand the
overall lay of the land. In this case, I subdivided the group
of emerging, disruptive, transformational technology into six
categories. Hence, the title of this chapter.
The Six Fronts of the Healthtech Revolution

Let’s look at the six along with examples of each. In some
cases, the technology has already hit the market and in others
it is still developing and evolving.23
1. Physical items representing clinical breakthroughs –

Direct patient care items used to diagnose or treat clinical
conditions. There are three categories:
– Diagnostic equipment – such as MRI technology,
teleradiology, and some wearables (like Apple Watch
4’s recent approval for certain EKGs). Many medical
imaging devices are already being miniaturized, and
hand-held ultrasound devices are now on the market.
In the near future, nanosensors will become embed-
ded into a patient’s bloodstream to constantly moni-
tor for cancer, autoimmune attacks on vital tissues, or
artery wall cracks which can be precursors of strokes
and heart attacks.24
– Interventional tools – such as equipment for robotic

surgery and laparoscopic surgery
– Devices and implantables – such as 3-D printing,
cardiovascular implants, the artifcial heart, stents, and
bionic limbs.
2. Mobile tools in the care delivery process – Most of the
following information appears in an article entitled “The
future of Medicine is in your smartphone,” by futurist
Eric Topol, MD, a cardiologist and director of the Scripps
Translational Science Institute. His article describes smart-
phones’ many uses in the arsenal of care delivery.
– App-based telehealth visits between providers and
patients – These can be for initial inquiries about
newly manifesting medical problems or for vir-
tual house call visits. App-based physician visits are
becoming more common and both Deloitte and PWC
predict that virtual visits will soon be the norm, replac-
ing in-person offce visits.25
– Smartphones as a cost-containment tool – Topol
reports that in some cities, patients can use a mobile
app to request a physician house call during which
the physician can not only do standard consultation
but can perform low-level procedures such as stitching
up a wound. This avoids what otherwise would have
been an expensive trip to the ED.
– Plug-in smartphone peripheral devices – These make
it possible to screen for problems like ear infections,
thus avoiding a trip to the doctor’s offce or urgent
care center. Future developments will include the abil-
ity to conduct routine lab tests for blood electrolytes;
kidney, liver, and thyroid activity; and breath, sweat,
and urine analyses. Besides being far more convenient
than institution-based testing, these tests should be
considerably cheaper.26
– Sensors – Topol also predicts that eventually wrist-
watch sensors could become the equivalent of having
an intensive care unit on your wrist. “As a result,

except for ICUs, operating rooms and emergency
rooms, hospitals of the future are likely to be room-
less data surveillance centers for remote patient
monitoring.”27
– The Internet of Things (IoT) – Topol references
necklaces that monitor heart function and check
fuid levels in a patient’s lungs, contact lenses that
track glucose levels and eye pressure, and head-
bands that monitor brain waves. In the future, he
says, we may see socks and shoes that can analyze
a person’s gait to tell Parkinson’s patients whether
their medication is working or inform caregivers
when an older person is at increased fall risk caused
by unsteadiness.
– Sensors to monitor environmental conditions –
Smartphone sensors will be able to monitor exposure
to radiation, air pollution, and pesticides in food, all of
which have an impact on people’s health.28
Topol sums these possibilities up like this:
This is heady stuff – but this vision of medicine

raises some serious and reasonable concerns.
Before these tools enter widespread use, they must
all be validated through clinical trials and shown
to not only preserve health but to do so while
lowering costs. Without such validation, the whole
promise of digital medicine will be for naught.29
3. Enhanced information-based care – Taking data from

various sources to design tailored care plans for each indi-
vidual and determine which treatment approaches will
likely yield the best results clinically and economically
and which best match the patient’s preferences and cir-
cumstances. Although there is some overlap between the
following categories, enhanced information-based care

can generally be subdivided as follows:
– Clinical: precision medicine – As opposed to a “one-
size-fts-all” approach where prevention and treatment
strategies are developed for the “average person,”
precision medicine factors in differences between indi-
viduals.30 It’s really a merger of the Human Genome
Project (which identifed all the approximately 20,500
genes in human DNA and determined the sequences
of the 3 billion chemical base pairs that make up
human DNA31), population health (which looks at the
health status of large groups of people), evidence-
based medicine (which identifes the treatment
approaches most likely to result in good outcomes
based on credible scientifc research and evidence),
and predictive analytics (which takes known informa-
tion and projects trends and outcomes into the future).
– Clinical: predictive analytics – Rather than merely look-
ing backward at a patient’s medical history, predictive
analytics combines historical data with other relevant
information to calculate the likelihood of future out-
comes. Outbound patient progress alerts help cli-
nicians and management staff track the patient’s
progress. This allows them to modify their care plans
as needed.
The online publication Health IT Analytics lists ten
ways Predictive Analytics can be used in healthcare:
1. Risk scoring for chronic diseases and popula-
tion health
2. Avoiding 30-day hospital readmissions
3. Getting ahead of patient deterioration
4. Forestalling patient no-shows
5. Preventing suicide and patient self-harm
6. Predicting patient utilization patterns
7. Managing the supply chain
8. Ensuring strong data security
9. Developing precision medicine and new

therapies
10. Bolstering patient engagement and satisfaction32
Each of these is a universe unto itself with great
potential to move the ball down the feld when it
comes to improving outcomes and control costs.
– Clinical: reduction in variation of care through
evidence-based medicine – Evidence-based medicine
seeks to bring greater uniformity to care through
supporting those treatment protocols that have been
shown to be most effective for most people. This
may seem in opposition to precision medicine where
care is tailored to the individual, but evidence-based
medicine’s real target is unnecessary variation in
clinical practice patterns that are not grounded in
evidence of the effectiveness of various treatment
protocols. Modern Healthcare reports that clinical
variation “is a signifcant contributor to healthcare’s
multibillion-dollar overuse problem” and cites a
2012 JAMA study that concludes spending could be
reduced by at least 20% without affecting outcomes
if care consolidated around best practices.33 The
British medical journal BMJ defnes evidence-based
medicine as “the conscientious, explicit, and judi-
cious use of current best evidence in making deci-
sions about the care of individual patients” which
integrates a clinician’s “individual clinical expertise
with the best available external clinical evidence
from systematic research.”34 Evidence-based medicine
often leads to automated clinical protocols as a start-
ing point for physicians to consider as they develop
care plans for patients with a particular problem or
disease. Combining evidence-based medicine with
precision medicine – which tailors the fnal course
of treatment to the individual based on the various
factors mentioned in the previous bullet – results in
fne-tuned care plans likely to yield favorable and

more cost-effective outcomes.
– Care coordination – This can help pre- and post-
discharge care and can also factor in a patient’s life
circumstances and preferences beyond just the clinical
concerns. Examples include:
◾ Chronic care apps that provide daily feedback
about patients’ vital signs and other circum-
stances to physicians
◾ Patient-scheduling apps and software to remind
patients of appointments and allow easy
rescheduling if necessary
◾ Social support aspects of Big Data such as psy-
chographic/demographic data that indicates the
patient’s preferred method of communication
and lifestyle preferences
◾ Post-acute patient placement based on a patient’s
insurance, certain clinical criteria, bed availabil-
ity, and patient preference
4. Communications – This category is subdivided as follows:
– As a front door to care or an information source for
patients – Examples include:
◾ Online physician directories to assist patients in
identifying providers
◾ Triage apps to help patients determine severity
of medical problems and the most appropriate
care setting
◾ Apps that help patients determine cost of pre-
scriptions, lab tests, physician visits, scans, and
other items so they can fnd the most affordable
suppliers35
– Communication between providers and patients for
patient education and to monitor patient progress and
trigger early intervention if necessary – As I explained
in Chapter 1, there is a movement toward bundled
payments, value-based payment, and accountable care
organizations all of which encourage more coordi-

nated care and interventions in the most appropriate
and cost-effective settings. I am thoroughly convinced
that these efforts cannot ultimately succeed without
effective deployment of mobile technology, which can
be used in the following ways:
◾ Communicating via apps and email – Examples
include reminders to use sunscreen; instructions
to pregnant women about what to do at various
stages of pregnancy; and contextualized mes-
sages reminding diabetes patients to improve
their activity levels, taking into account the
weather, diabetes patients’ location, their activity
levels, and their motivation.36
◾ Providers being able to direct patients to
appropriate and trusted websites for clinical
information
◾ Automated post-discharge information and per-
sonalized instructions delivered on laptops or
mobile devices that reinforce patient follow-up
actions at the appropriate intervals
◾ Some wearable technologies that provide bio-
metric data and subjective information, allow-
ing the clinician to track patient adherence and
progress
◾ Behavioral health patient engagement apps and
telemedicine consults
◾ “Telesitter” services capable of monitoring sev-
eral at-risk patients at the same time
◾ Smart pill boxes that enable clinical personnel to
track a patient’s medication adherence
– Communication among providers
◾ EHRs that can be accessed by various clinicians
involved in treating the same patient
◾ Teleradiology that allows remote consultations
among physicians
5. Clinical research – 21st-century mobile technology is hav-

ing an impact on research. Here are two examples:
– The proliferation of iPhones and the apps built into
Apple’s ResearchKit have made recruiting clinical
research participants easier. ResearchKit helps fnd
participants and collect their data and also provides
an open source framework facilitating researchers’ app
development. These apps can also gather more data
resulting in more robust analyses.37
– Apps themselves are also the subject of research –
The University of Michigan and Apple have teamed
up to determine if the data collected through the
Apple Watch can be combined with other data to
better assess patient’s health, wellness, and risk for
disease.38
6. Business functions – This category can also be
subdivided.
– Clinical applications
◾ Lean process improvement – Data-driven mul-
tidisciplinary teams that meet to seek improved
outcome measures. One example is an ED
workfow study to enhance quality, effciency,
and throughput.
◾ Automating clinical tasks, thereby allowing care-
givers to focus on things only they can do. For
example, one app attempts to alert physicians
about the availability of certain prescriptions as
well as determine if the patients’ health plan
covers that particular drug. If this verifcation is
done before the patient leaves the physician’s
offce and an availability or coverage problem is
discovered, the clinician can immediately seek
a substitute drug. Without this capability, if the
patient goes to the pharmacy and discovers
the problem, they have to recontact the physi-
cian’s offce, and the physician must review the
patient’s chart to refresh their memory and then

order a substitute. This is not good use of the
physician’s time.
– Non-clinical applications – These are standard business
functions that every organization has:
◾ Market analyses
◾ Operating room, lab, and therapy session
scheduling
◾ Billing and administrative processes
◾ Staff scheduling and other human resources
functions
◾ Wayfnding apps to help patients navigate health
system campuses
◾ Optimization of facilities functions such as utility
consumption, maintenance tasks, etc.
◾ Device warranty management
This list of the six major categories is both overwhelming

and incredibly exciting. As these capabilities continue to
roll out into the marketplace, millions of patients will ben-
eft. Collectively, products in these areas are changing how
care is delivered, and I frmly believe that many aspects of
the healthcare system of 2030 will bear little resemblance to
what we have today because of these exciting innovations.
And that’s truly a reason to be optimistic. If you work in the
healthcare technology realm, congratulations. This is a great
place to be!
End Notes
1. “How Many Cell Phone Subscribers in the US 2018,” http://
www.mediatechreviews.com/how-many-cell-phone-subscribers-
the-us/, accessed April 5, 2019.
2. “Tablet Penetration in the United States from 2011 to 2020,”
https://www.statista.com/statistics/208033/forecast-of-the-tablet-
penetration-in-the-us-up-to-2014/, accessed April 5, 2019.
3. Jessica Kim Cohen, “Rush University goes all in,” Modern

Healthcare, May 13, 2019, pp. 26-28.
4. www.healthstandards.com/blog/2017/10/25-digital-health-
trends-2025/, accessed April 23, 2019.
5. “Precision Medicine Market Statistics and Research Analysis
Released in latest report,” https://www.marketwatch.com/
press-release/precision-medicine-market-statistics-and-
research-analysis-released-in-latest-report-2019-04-26, accessed
April 27, 2019.
6. Sean Lightbown, “Here are 4 key trends in VC healthtech
investments,” https://pitchbook.com/news/articles/4-trends-in-
vc-healthtech-investment, accessed April 24, 2019.
7. “On the digital health frontier,” Modern Healthcare, April 10,
2017, page 29.
8. Deloitte, Out of the valley of death, 2017, page 9, https://www2.
deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-
health-care/us-lshc-medtech-innovation.pdf, accessed April 26,
2019.
9. https://research2guidance.com/325000-mobile-health-apps-
available-in-2017/, accessed April 23, 2019.
10. CCS Insights, “Wearables Market to Be Worth $25 Billion by
2019,” https://www.ccsinsight.com/press/company-news/2332-
wearables-market-to-be-worth-25-billion-by-2019-reveals-ccs-
insight/, accessed April 24, 2019.
11. Jessica Wade, “Wearable Technology Statistics and Trends
2018,” https://www.smartinsights.com/digital-marketing-
strategy/wearables-statistics-2017/, accessed April 24, 2019.
12. https://liquid-state.com/digital-health-app-trends-2018/
13. “What are the investment trends in the healthtech industry
for 2019? Answers in this Hong Kong event,” https://www.
prlog.org/12750042-what-are-the-investment-trends-in-the-
healthtech-industry-for-2019-answers-in-this-hong-kong-event.
html, accessed April 24, 2019
14. https://research2guidance.com/about-research2guidance/,
accessed April 23, 2019
15. mHealth Developer Economics: Connectivity in Digital Health,
Research 2 Guidance, November 2018, pages 12–14.
16. Nick Wingfeld, Katie Thomas and Reed Abelson, “Amazon,
Berkshire Hathaway and JPMorgan Team Up to Try to
Disrupt Health Care,” The New York Times, January 30, 2018,
https://www.nytimes.com/2018/01/30/technology/amazon-
berkshire-hathaway-jpmorgan-health-care.html, accessed
April 24, 2019.
17. Roman Luzgin, “Healthcare Will Catalyze Apple’s Growth,”
https://seekingalpha.com/article/4155362-healthcare-will-
catalyze-apples-growth, March 11, 2018, accessed April 23, 2019.
18. James Thorne, “Should Apple Join Amazon’s Health Venture?
Analysts make the case for collaboration between tech
giants,” https://www.geekwire.com/2019/apple-join-amazons-
healthcare-venture/, April 19, 2019, accessed April 24, 2019.
19. Doug Newcomb, “The Big Data Boom,” Automobile,
October 17, 2017, https://www.automobilemag.com/news/
the-big-data-boom/, accessed April 26, 2019.
20. Frank Markus, “Medi-Cars: Taking ‘onboard diagnostics’ to a
new level,” Motor Trend April 2019, page 27.
21. “A disruptor becomes the norm,” Modern Healthcare, April 24,
2017, page 29.
22. “Use it or lose them,” Modern Healthcare, March 25, 2019,
pages 18–20.
23. Some of the specifc technology examples that follow were
included in Modern Healthcare’s, fortieth anniversary issue
published July 11, 2016 that lists the industry’s top milestones
of the previous forty years.
24. Eric Topol, “The future of Medicine is in your smart-
phone,” Wall Street Journal, January 9, 2015, https://
www.wsj.com/articles/the-future-of-medicine-is-in-your-
smartphone-1420828632, accessed April 28, 2019.
25. ibid.
26. ibid.
27. ibid.
28. ibid.
29. ibid.
30. “Help Me Understand Genetics: Precision Medicine,” Lister
Hill National Center for Biomedical Communication, U.S.
National Library of Medicine, https://ghr.nlm.nih.gov/primer/
precisionmedicine/precisionvspersonalized, April 16, 2019,
accessed April 27, 2019, page 3.
31. Human Genome Project Information Archive, 1990-2003,
https://web.ornl.gov/sci/techresources/Human_Genome/index.
shtml, accessed April 27, 2019.
32. Jennifer Bresnick, “10 High-Value Use Cases for Predictive

Analytics in Healthcare,” Health IT Analytics, https://
healthitanalytics.com/news/10-high-value-use-cases-for-
predictive-analytics-in-healthcare, September 4, 2018, accessed
April 28, 2019.
33. Jessica Kim Cohen, “Using AI to reduce clinical variation,”
Modern Healthcare, March 11, 2019, page 30.
34. From BMJ 1996; 312:71-72, cited in “Evidence-Based Medicine
Defnitions,” NYU School of Medicine Frederick L. Ehrman
Medical Library, https://library.med.nyu.edu/library/instruction/
handouts/pdf/ebmdefnitions.pdf, accessed April 27, 2019.
35. Topol, “The Future of Medicine Is in Your Smartphone.”
36. Karen Wahner, “How Mobile Health Is Changing Care
Delivery,” leadership, Fall 2014, page 24.
37. “Top 10 Digital Health Use Cases for 2018,” https://www.
progress.com/solutions/health-cloud/resources/top-10-digital-
use-cases-for-2018, accessed April 27, 2019.
38. “University of Michigan, Apple team up on study,” Modern
Healthcare, March 25, 2019, page 5.
Chapter 5
Timing Pitfalls
Timing is everything.
One thing I appreciate about entrepreneurs is that many of

them see opportunities and are able to anticipate future needs
and, as hockey star Wayne Gretzky once famously said he
skated “to where the puck is going to be.” Having a good
sense of developing needs and being able to arrive there
ahead of others is admirable.
The danger for some innovators, though, is getting there
too early, before the market is ready. Musicians, artists, and
authors are among those most adversely affected by being
underappreciated in their times or early in their careers, only
to have their genius recognized down the road. Perhaps you
will be encouraged by the story of Max Lucado. With well
over 100 titles to his credit, he is an international best-selling
author and one of the most successful writers of inspirational
books of all time. However, his career as a published author
got off to a rocky start. His frst manuscript was rejected over
and over – ultimately 14 times – before one publisher fnally
took him on. In his case, he understood the reader market
better than the “experts” did, and it took time for him to fnd
the one publisher who “got it.” Having unrecognized genius
95
can be frustrating, but sometimes it just takes perseverance

and patience before you achieve success.
Unfortunately, this phenomenon can plague healthtech
innovators as well. I’m aware of some worthwhile products
that ultimately failed only to see someone else come along
later with substantially the same concept and succeed because
either the market or the technology had fnally caught with the
concept. I wish I could advise you on how to get around this
problem, but if the market isn’t ready, it just isn’t ready and
there’s not much you can do about it.
There are, however, several pitfalls related to timing that I
can help with, so please read about these problems and pos-
sible solutions in this chapter.
1. Launching Either Too Early or Too Late

Developers and entrepreneurs spend months or even years
preparing their products for market introduction. A dan-
ger they face is misjudging when to launch. They must
heed the old saying, “You only have one chance to make a
frst impression,” but some may obsess over this too much
and, therefore, delay their product’s introduction longer
than necessary. This can lead to either losing the “frst-
to-market” advantage – giving competitors some daylight –
or to missed sales, which could hamstring a cash-starved
company.
On the other hand, in an attempt to beat the rest of the
market, some vendors make the opposite mistake of launch-
ing prematurely, with sometimes devastating results. Do you
remember Apple’s disastrous 2012 launch of its new Maps app?
It worked perfectly, unless you didn’t want to have to fnd a
baseball stadium on the top of a mountain or were confused
by aerial-view interstate maps that resembled overcooked spa-
ghetti. Once a product gets cast as inferior, it can take years to
recover. Some never do.
Timing Pitfalls ◾ 97
Recommendation:
◾ If you are introducing a groundbreaking service or product,
seek the sweet spot where your minimally viable product
performs all its essential functions adequately yet still gives
you a head start in the market. Waiting until every
“nice-to-have” is in place can unduly delay your launch.
The concept here is to not let the perfect get in the way of
the good. As you release version 1.0 – which will have all
the essential features – you can simultaneously start talking
about the enhancements in the works for version 2.0.
A product that does exactly what it purports to do – even
if it’s not particularly fancy – establishes your credibility
and starts the cash fow so vital to continued development.
When early adopters like what they see, they will likely talk
your product up among their peers.
There is less pressure to launch prematurely if you are
entering a commoditized market. Since you are not the
frst one offering such a product, you don’t run the risk of
someone encroaching on your new approach, so delaying
a bit probably won’t prove fatal. However, you must still
evaluate your cash fow needs. All companies must fnd
just the right balance between hitting the market too early
and waiting too long.
2. Failing to Get a Serious Hearing

Because You are a Start-Up
This problem plagues tech start-ups in all felds, not just
healthcare. Over coffee, a friend with an exciting new com-
pany in the communications/sales arena relayed his tale of
woe over being rejected outright by a large corporation before
he even was able to meet with them in person. “Our policy is
to only work with established companies,” he was told. This
company was more upfront about their policy than some.
I’ve had some healthtech clients lament over the fact that a
healthcare organization they were targeting lost interest once

they found out the tech company was a very early stage com-
pany with no active customers.
This reluctance is understandable. The healthcare environ-
ment is incredibly complex, both in terms of how its organized
and how a bewildering array of technical pieces must ft together.
Working with an unproven company can be risky, and issues
with an installation or with how the product operates can cause
problems to cascade to other parts of the healthcare organization.
However, this leaves the start-up in a lurch. It’s the same
dilemma early careerist face. They can’t get a job without
experience, and they can’t get experience without a job. Start-
ups desperately need at least a few clients they can point to.
Additionally, every start-up needs an infusion of cash, and
unless they have a stable source of capital, not having paying
clients early on can be the death-knell.
When Oracle launched in 1979, they pursued the interesting
strategy of calling their initial version Oracle 2 – there was no
version 1 – to minimize the impression they were a brand-new
company.
Recommendation: There is nothing you can do to hide the

fact that you don’t yet have any clients, but there are three
schools of thought about whether or not to charge your very
frst users.
1. Just as someone embarking on a new career must often
complete an unpaid internship, you may need to seek
one or two free pilots to prove the value and effectiveness
of your product. Any pilot requires a certain degree of
accommodations by the host as it adapts operationally,
so there is a cost to them, even if it is not monetary. Also,
the pilot host is taking on a degree of reputational risk
as they trust an unproven product that could fail. Some
companies that decide to offer a free pilot to one or two
organizations feel that charging anything at all creates
yet another hurdle in the approval process.
2. Another approach is to offer a greatly reduced price for

the frst few users. This at least gets the cash fow started
and may be necessary if you are very tight on fnances
and/or if the installation process would require signifcant
out-of-pocket costs for you. This approach also makes sure
the client has some fnancial “skin in the game.”
3. Other start-ups charge full price right out of the gate.
This approach refects the old adage that something you
get for free is worth every penny you spent. Charging
full price can be effective if your product is relatively
affordable (as opposed to involving a multimillion-dol-
lar investment).
There are several factors to consider in determining

your initial pricing option: your fnancial condition,
how expensive your product is perceived to be, and the
“prestige” of the potential pilot site. Remember, the over-
riding goal is to get a referenceable user or two.
3. Launching a Product Before the Overall

Healthcare System Has Caught Up with
Its Financial Policies
By defnition, disruptive technology upsets the status quo. A
new healthtech product is worthless if no providers buy it, and
no one will buy it if there is no way to pay for it. The health-
care world is notoriously slow in responding to changes in the
environment.
There are three fnancial problems some vendors face rela-
tive to this issue:
1. A new clinical technology does not ft within the existing

payment codes. No code means a procedure can’t be billed.
And without a way to bill, no one will adopt the innovation.
This problem most typically affects medical devices.
2. Even if an adequate code exists, payers must agree to

pay for the service. Telemedicine is the most prominent
recent victim of this problem. There are many reasons
to employ this technology, among them convenience of
patient access, an ability to tap into specialty care oth-
erwise unavailable, and a chance for providers to reach
into remote markets. However, insurance companies were
slow to pay for this type of remote intervention, and that
hampered the sector’s growth. Fortunately, the tide has
begun to turn in the last few years regarding payment for
telemedicine.
3. Even if a new device greatly improves clinical outcomes,
it will face strong headwinds if it increases costs for
patients paid under any kind of prospective payment sys-
tem like Diagnosis-Related Groups (DRGs), which pay a
fat fee for a given type of inpatient admission. DRG pay-
ment rates are based on historic costs for that service. If a
new device costs the provider $1,000, unless it replaces an
existing approach that costs at least $1,000, the net impact
is increased cost to the hospital. Until the payers factor
the net increase of cost into their DRG payment, the addi-
tional expense comes from the hospital’s bottom line.
Recommendations:
◾ Addressing the frst problem listed above – First and fore-
most, be aware of the need for an appropriate billing code.
Don’t fnalize your sales and revenue projections until you
understand whether there a billing code for your device
and, if not, when you can expect one.
◾ Addressing the second issue – If there are appropriate
codes but payers don’t yet recognize the service, approach
some of the major payers in your market to open a dia-
logue about how to go about getting them to consider your
new approach.
◾ Addressing the third point – Your objective is to get pro-
viders to incorporate your new technology into their
standard treatment protocols. Make sure you understand

the payment dynamics surrounding the current treatment
modalities. There are three possible scenarios regarding
introducing a new device:
1. It can replace and is less costly than an existing
device – This is the dream scenario. As long as your
technology is demonstrably clinically or operationally
equal to or better than the one you are trying to upend,
it’s easy to make the case that they should switch.
2. It can replace an existing technology but is more
expensive – You must recognize that this will result in a
net negative fnancial impact for any cases paid under
a DRG. At that point you must stress non-fnancial
benefts. These might include superior outcomes which
could potentially shorten length of stay or contribute
to the hospital’s readmissions reduction efforts, added
convenience for clinicians, or greater patient comfort.
Just be very conservative in your projections about cut-
ting length of stay or readmissions. Don’t over-promise
results that can’t be realized. See Chapter 12 that dis-
cusses Return on Investment (ROI) issues for ideas
about how to develop believable ROI projections.
3. It supports enhanced outcomes but does not replace
another approach and, therefore, results in a direct
fnancial loss for DRG patients. This situation is tougher
than option 2 immediately above. The suggestions
offered there also apply here, and you must be even
more conservative in your ROI numbers. Adding a
costly new device without replacing an existing one
can put signifcant stress on the hospital’s cost structure.
In order to justify the new expenditure, you might be
tempted to be more aggressive with potential savings
through reduced length of stay or readmissions. As
indicated above, it’s important to heed the advice in the
ROI chapter.
Chapter 6
Credibility Pitfalls
Credibility is one of the most important factors in any busi-

ness relationship. There are at least two aspects to credibility:
how much you know and how trustworthy you are. Even if
you are a wonderful person, if you don’t really understand
my business or don’t have the qualifcations to carry out what
I’ve asked you to do, I’m not willing to work with you. One of
my very best friends is a great guy who is a highly effective
sales executive in the commercial ftness equipment feld. But
there’s no way I’m going to let his do my root canal. Similarly,
if someone has demonstrated that they cut corners ethically or
don’t always follow through with their promises, I will cer-
tainly think twice before agreeing to partner with them.
This chapter presents 13 credibility-related pitfalls and how
to minimize their impact.
4. Tipping Your Hand as a Healthcare

“Outsider”
The healthcare world has one of the highest densities of
well-educated people of any industry. All clinical people have
earned their credentials through years and years of education
103
and practical experience. Physicians, for example, typically

have a four-year undergraduate degree and a four-year medical
school degree. This is usually followed by post-graduate train-
ing programs that can last from three to seven years. After all
this, many pursue certifcation by the medical boards in their
respective specialty areas: surgery, cardiology, family medicine,
etc. Earning and maintaining these designations requires ongo-
ing education and passing rigorous exams.
Physician assistants (PAs), nurse practitioners (NPs), licensed
practical nurses (LPNs), certifed registered nurse anesthetists
(CRNAs), physical therapists (PTs), radiation technologists (RTs),
and other professionals have their own demanding educa-
tional and certifcation requirements. Hospitals and healthcare
organizations also employ many highly trained and experi-
enced experts in non-clinical areas. This group includes senior
executives, statisticians, government relations offcers, and
many others.
This rarifed environment can lead people in healthcare
organizations to be justifably proud of their accomplishments
and knowledge bases. Although most individuals in the
healthcare world are gracious, you will occasionally fnd some-
one with a condescending attitude toward those who have not
invested in their education as they have.
Some vendors from outside the healthcare industry
underestimate the gulf that exists between industry insid-
ers and “everyone else” and incorrectly conclude that their
expertise as a business leader or technology expert grants
them equal footing with their sales target. It’s easy to act
a bit too casually in their interactions with these people.
Not a good idea.
Recommendations:
◾ You can’t – nor should you try to – pretend that you’re
“one of us” if you’re not. Your resume and background
clearly demonstrate the degree of your healthcare experi-
ence, or lack thereof.
Credibility Pitfalls ◾ 105
◾ Get thoroughly familiar with the operational principles

and clinical dynamics of the area that your product falls
into. If it changes the workfow in a given department, it’s
important for you to demonstrate that you know both how
the existing process works and how practices will change if
they adopt your product.
◾ Make sure to use credible examples for any case stud-
ies or application examples you might present. In my
role as executive vice president at the Georgia Hospital
Association (GHA), I often had vendors seeking the
association’s endorsement come through my offce. In
the early days of the Internet, I had one salesman blus-
ter his way into my offce and announce that he was
proud to be a healthcare outsider since he could look at
the industry with fresh eyes and “bring effciency into
hospitals.” He had one of the frst Internet-based hospi-
tal supply management software products and wanted
to demonstrate it. He offered to show how he could get
a really good price on some medical supplies. “What
should I get a price for,” he asked, “band-aids?” As
soon as I heard the word “band-aids,” I knew he didn’t
know the frst thing about hospital purchasing practices.
That term is never used in serious clinical settings. His
approach reminded me of the old saying, “Remain quiet
and be thought a fool, or speak and remove all doubt.”
Having a poor example like he had is not necessar-
ily a fatal mistake, but it won’t certainly bolster your
credibility.
◾ Learn the relevant vocabulary and how to pronounce
unfamiliar terms. Nothing identifes an outsider quicker
than misusing, misspelling, or mispronouncing a term
that everyone in the industry uses. Learn the difference
between a Medical Assistant (MA), a Licensed Practical
Nurse (LPN), and a Registered Nurse (RN), and learn their
various roles. Another common mistake outsiders make
is the misspelling HIPAA, the acronym for the Health
Insurance Portability and Accountability Act. Because of

the word “HIPAA”’s resemblance to the name of that large,
gray zoo animal, many non-healthcare people inadver-
tently spell it HIPPA. I have heard more than one health-
care person mutter under their breath that that’s the kiss of
death when they see that.
5. Violating an “Unspoken Rule”

or Protocol of the Industry
Industry outsiders don’t necessarily know the “rules of the
road” that everyone within that sector observes. As with the
previous pitfall, these aren’t necessarily deal-killers, but why
place unnecessary roadblocks in your way?
This pitfall could be considered an extension of the pre-
vious item. One non-negotiable expectation is that physi-
cians will be treated with utmost respect and be referred to
as “Doctor” instead of “Fred.” The protocol around executive
staff varies from institution to institution. In some organiza-
tions, the top executives are called “Mr.” or “Ms.” while in
other hospitals, frst names are fne. I did a summer adminis-
trative residency between my two years of graduate school at
an academic medical center with an extremely formal execu-
tive team. No one ever considered calling the CEO anything
but “Mr. Black.” One Sunday afternoon, my wife and I were
furniture shopping and we ran into Mr. Black with his fam-
ily. He was dressed in a $700 navy blue wool suit with a
dark tie, perfectly knotted. He immediately apologized for
being dressed so informally on a Sunday. He was informal?!?
Compared to him, I was a slob. I wanted to dive behind a
sofa so he wouldn’t see that I was wearing jeans. He remained
“Mr. Black” to me.
Another unspoken rule is that outsiders should be careful
not to be too critical of the healthcare feld. Everyone who
works within it is thoroughly aware of all our shortcomings,
and we talk freely about them among ourselves. Although

many of us don’t mind admitting our shortcoming to
“outsiders,” we typically only go so far in doing so. Healthcare
is an extremely complex environment, and those who are not
part of the industry don’t always catch the nuances of why we
do things the way we do and come to conclusions and make
judgments that aren’t exactly wrong but aren’t completely
right either. I once had a vendor lecture me on how poorly
run hospitals are. Although he had some valid points, I found
myself getting a bit defensive because some of his comments
revealed he really didn’t understand or appreciate why we do
some things the way we do.
It’s one thing for people to be self-critical and another
for others to make disparaging remarks about you. Several
years ago, I saw a great example of this. Our city of Marietta,
Georgia, has a great little theater right on the downtown
square. For many years, they hosted a play called Smoke on
the Mountain that looks at life in a tiny, very conservative
1940s church in the Tennessee mountains. The play pokes fun
at many of the typical traditions and practices of that type of
church. But it’s done lovingly from an “insider’s” perspective
and it quite funny. As a Christian, I greatly enjoyed seeing the
wit of “one of us” who’s not afraid to point out some of the
funny and silly things we do.
On the other hand, I was at a professional meeting in
Jackson Hole, Wyoming, several years ago and we had a
free evening, so our group decided to go to a play at a small
theater that dates back to the late 1800s. It ended up being
a different comedy that also poked fun at religious people.
Although a lot of the barbs were justifed, the tone was a little
off. There was just something about the dialog that revealed
the playwright didn’t really understand or appreciate the
motivations of the churchgoers he was lampooning. It wasn’t
particularly offensive, but it was just “off” enough that this play
didn’t come across as well as the other one had or as particu-
larly funny.
This is analogous to what can happen when non-healthcare

people get too pointed in their critiques of the industry. I’m
the frst to admit that our industry is far from perfect, but I get
a bit protective when an “outsider” starts taking swipes before
they really understand the culture.
On another note, I recently had a slightly uncomfortable
experience with breaking one of the rules of another indus-
try. After spending 30 years in the hospital feld, I launched
my consulting business where I advise developers and entre-
preneurs with their strategies regarding how to approach the
healthcare market. Another target client base of mine is the
investor community since they evaluate newer companies,
trying to decide if they should fund them or not.
Right after starting my new company, a professional
friend gave me the list of several organizations that might
beneft from my experience. One of them was an associa-
tion that hosts monthly breakfast gatherings for local inves-
tors. Interestingly, their meetings are in the exact same
meeting room in the Buckhead Maggiano’s that the Georgia
Association of Healthcare Executives (GAHE) – a group I’ve
been associated with for decades – meets in. GAHE goes out
of its way to invite newcomers, hoping to expand our involve-
ment, and frst-time attendees are given special recognition
and a round of applause. I am very familiar with and comfort-
able with the meeting room where I have consumed way too
many calories over the years.
On the appointed day, I showed up at the investors’ meet-
ing and was politely greeted. As the meeting progressed, I
slowly realized that newcomers really aren’t supposed to just
show up without having been specifcally invited by an exist-
ing member as a “sponsor.” The building didn’t cave in on
me, but my minor faux pas created a bit of a barrier between
me and the other attendees, resulting in a mild level of
discomfort.
The reason this is such a great example is that both the
GAHE group and investors’ group meet in the very same
room, and I was transferring my behavior from GAHE to the

new group, not knowing they operate differently.
Here’s one fnal example. Physicians, business executives,
and technology developers live in separate worlds. Although
every profession should adhere to the highest ethical stan-
dards, values important to one group may not be so key for
others.
I asked a very good friend of mine who is a just-retired
OB/GYN physician to review part of this book’s manu-
script. As we were discussing his reactions, he told me he
saw one phrase he didn’t like. I wondered if I had misused
some kind of medical term, and I was surprised to learn
the words he didn’t like were “disruptive technology.” That
phrase has become an accepted buzzword within both the
technology and the business worlds. Everyone is all about
trying to disrupt the old ways of doing things, interject
innovation, and reformulate processes to create more con-
temporary and streamlined approaches. So, disruption is
good.
That’s not how my physician friend saw it. “When I hear
you talk about disruption,” he said, “it sounds like you’re
trying to mess up my day.” This example is technically not a
violation of any protocols, but it does show that word choices
don’t always accomplish what we think they will.
Recommendations:
◾ The default should always be to refer to a physician as, for
example, Dr. Campbell, until and unless they invite you
to call them by their frst name. On more than one occa-
sion, I have seen younger sales people, in an attempt to
appear friendly, jump immediately to calling physicians by
their frst name. Maybe they’re trying to create a relaxed
restaurant environment, as in “Hi! I’m Bobby, and I’ll be
your server tonight.” Bad idea. It’s never a problem to be
too formal with a physician, but doing the opposite can
set you back. Even as someone with decades of experience
in the hospital feld, when I frst interact with a physician

(some of whom are younger than I am), I use their formal
title unless they suggest otherwise. My unoffcial rule is
that if I ever get to the point with that physician of being a
friend they would go out to a social lunch with, then I fip
to a frst name basis.
◾ Regarding non-physician staff, take your cues from others
in the organization. If the CFO calls the CEO “Ms. Roberts,”
do the same.
◾ If you don’t come from the healthcare world, it’s OK to
acknowledge some of our shortcomings. But do so with a
sense of respect.
◾ Try to spend time with some of your more experienced
colleagues and ask them for any helpful insights. Probe
around for any sensitivities you may need to know about,
and fne-tune your vocabulary to match your target
group’s preferences before you get in front of them.
◾ If you inadvertently breach a minor protocol, learn from
the experience but don’t obsess over it. The feld is not
so unforgiving that you will be excommunicated over a
minor infraction.
6. Showing Naïveté by Asking to See

the Hospital’s Strategic Plan So You Can
See Where You Can Help Them
Most sales people try to build bridges to potential clients by
showing how they can address the client’s need. That’s a great
approach. However, occasionally, a vendor asks to see an
organization’s strategic plan so they can demonstrate how their
services can address their objectives. Asking something like
that clearly labels you as an outsider. Most executives feel that
any company that provides them services should be in tune
with them to the point that they have a good handle on what
they need.
Physicians and healthcare executives are surveyed on a reg-

ular basis, and information about their needs is readily avail-
able online and in industry publications. The top felt needs
inevitably make their way into every strategic plan. Many
executives expect their partners to understand their needs and
don’t feel compelled to educate sales people on things they
should already know.
Recommendation:
◾ Rather than asking to see a healthcare organization’s
strategic plan or asking open-ended questions like, “What’s
your greatest need?” a better approach is to go into the
meeting armed with industry-specifc information and
ask targeted questions. For example, if you are offering a
new analytic tool that helps physicians address their cost
structure, you can start the conversation with something
like, “According to a survey by (name of the survey com-
pany), physicians’ biggest frustration on the cost side is
their inability to manage personnel costs because of vari-
able patient volume. Would you say that’s a big problem
for you?” This demonstrates that you have done your
homework and are attuned to one of their important pain
points. This paves the way for a meaningful discussion.
7. Showing Naïveté by Expecting a Hospital

to Become a Developmental Partner
One of the exciting aspects of breakthrough technology is
its ability to create new solutions to chronic problems. A big
challenge, though, is designing your approach to hit the center
of the bullseye. Enlisting the involvement of potential custom-
ers in the design and implementation phases goes a long way
toward accomplishing this. However, fnding a partner can be
tricky. Hospital resources are greatly stressed, and few organi-
zations have available bandwidth to redeploy people to help
with a new project unless it is one of their obvious areas of

major concern. Be careful about requesting their involvement
in a vague area or with a fairly undeveloped concept.
I myself violated this principle not too long after starting
my consulting business. Some fellow consultants and I banded
together around a concept for an analytical approach to fx-
ing throughput problems in hospitals’ Emergency Departments
(EDs). Two of us had good relationships with a local health
system’s innovation department director, so we approached
him about helping defne a specifc problem and then devel-
oping an appropriate solution. Even though we had a robust
team with the right skillsets and understood the generic issues
surrounding ED throughput, our problem was that we didn’t
know enough about this system’s particular ED challenges
to propose a specifc approach that would immediately help
them out. Not surprisingly, we never even got to frst base
with them. They were too swamped with other priorities to
take on a vague project to solve a problem they may or may
not have had. The fact that two of us had some degree of
personal relationships with this department head demonstrates
that, although relationships are important, they’re not enough
to carry the day if you have a bad idea.
Recommendations:
◾ It’s entirely possible and highly desirable to partner with a
healthcare provider organization in the development of a
new product. You can maximize your chances of success
by approaching a potential partner with a very specifc and
fairly well-developed proposal that you know attacks one of
their important problems. The closer to beta testing you can
be, the less development effort they will have to make, and
the more likely it is that they will agree to work with you.
The best partnership candidates are organizations with
which you already have a good working relationship. That
will help you be very specifc in putting forth an idea that
you know will target one of their identifed problem areas.
◾ If you are fortunate enough to fnd a healthcare organi-

zation willing to join in the development effort, be aware
that if they decide to jump in, they are likely to ask for an
equity stake in the resulting product.
8. Implying a Stronger Level of Support

or Endorsement from a Client or Reference
Every time a vendor meets with a potential client, they under-
standably want to create the most positive impression possible.
Providing credible user references always helps and is standard
practice. Before you list an existing client as a satisfed user,
though, common sense dictates that they will, indeed, say
good things about you. And it’s always a good idea and only
polite to ask their permission to include them on your list.
Start-ups have the additional problem of having few or no
existing clients. Since I work with a lot of these companies, I
hear how they describe their relationships with their potential
customers. In an attempt to maximize their perceived attrac-
tiveness, some of them are tempted to exaggerate the positive
comments they are receiving. Sometimes in my conversation
with start-ups who drop the names of hospitals or physicians
considering their products, I push back a little to fnd out if
their targets are truly as positive or invested as they imply. If
their support is not quite as strong as the vendor suggests and
another potential customer checks into their reactions, your
reputation will be tarnished, something you should avoid at all
costs. Don’t do anything to damage your reputation.
Recommendation:
◾ Be positive yet completely honest about the feedback you are
getting from clients or potential clients. It’s fne to mention
that a particular healthcare organization had a positive
reaction to your product and is considering purchasing it.
However, don’t overstate the degree of their support. The
healthcare community is a small one, and an executive at

one organization could very well pick up the phone to ask
their friend at another one to verify that they really liked the
product as much as you say they did.
9. Offering a Clinical Product with Minimal

or No Demonstrated Clinical Validity
or Having Only Anecdotal Support
Physicians are trained to adopt evidence-based treatments, so
they are not about to embrace any diagnostic tool, medical
device, or service without assurances of its clinical effective-
ness. The gold standard of medical research is a double-
blinded clinical study where patients are divided into two
groups, one which gets the experimental intervention and the
other which gets an alternative approach. In order to mini-
mize the chance of bias, neither the patient nor the researcher/
clinician knows which group gets which treatment in a
double-blinded study. This type of study is most common in
pharmaceutical research.
Double-blinded, peer-reviewed studies are very expensive
and time-consuming. Conducting these can be problematic
for start-ups, few of which have the resources or timetables to
undertake such extensive studies.
Typical research project measurements include the differ-
ences between the two groups in post-intervention outcomes
like recovery time, time to return to full activity, and patient
satisfaction. The experimental and the control groups are com-
pared to determine whether the intervention’s differences are
statistically signifcant with a known probability of error.
Technology-related products run the gamut from medical
devices and pharmaceuticals to medical apps to interventions
that involve information collection and care coordination. The
frst group requires the Food and Drug Administration (FDA)
approval, a whole world of its own. Care coordination or
information sharing approaches don’t demand the same level

of scrutiny, but being able to demonstrate effectiveness is
still vital.
Another research consideration is where study results are
reported. Each medical area has its own specialty society
and, typically, its own journal. Most journals have editorial
committees composed of physicians from that specialty who
review and approve all articles. There is a defnite “peck-
ing order” of medical journals, and the more prestigious
the publication, the better. These journals can be infuential
references because they regularly include studies of how
changing pre- or post-discharge care – often supported by
new technologies – affect patient outcomes. If you can have
an organization use your product and get it written up in a
credible journal, you are well on your way toward market
success.
Mobile apps targeted for consumers are particular objects
of clinicians’ skepticism. Spyros Kitsiou, a University of Illinois
at Chicago assistant professor in biomedical and health infor-
mation sciences, indicates that very few consumer-facing apps
have been formally evaluated and calls for greater regulation
and oversight of these apps.1
Recommendation:
◾ Lacking quantifable clinical credibility can be a tough
problem to overcome. If you don’t have the research, you
don’t have it. But you can still point to whatever clini-
cal support for your product you have. Perhaps you have
a study underway or have a beta installation. In those
cases, you can point to preliminary results, even if they are
anecdotal. Expect extended discussions with physicians
about the clinical effectiveness of your approach. A key
is remaining very humble about the level of clinical evi-
dence you can point to. In other words, understand that
anecdotes are seldom convincing. But they are not nothing
either.
10. Offering a Clinical Product without

Credible Clinicians as Part of the Organization
or Advisory Board
This relates to the previous pitfall. Clinicians demand evidence
that your offering is good for patients. More than once, I have
seen a physician get into a somewhat heated discussion with
a non-clinical executive or a salesperson over a decision that
has an impact on patient care. If the doctor is in a bad mood
or is somewhat lacking in social graces, they might blurt out,
“Where did you go to medical school?” This can be very dis-
arming and is dropped as the ultimate conversation-stopper.
Recommendation:
◾ If your product is, indeed, clinical, expect and prepare for a
challenge to its clinical validity. You do not personally have to
have direct clinical experience, but it is vital that you be able
to point to a highly credible source within your organization
who does. This can be a physician medical director or physi-
cian members of an advisory board when they have actually
had input into the product development. At some point, it
may be desirable to fy your clinical representative in to meet
face-to-face with the healthcare organization’s medical staff.
By all means, act with confdence concerning your product
and what it can do, but be very careful about over-stating
its capabilities. Doing so just invites the “Where did you go
to medical school?” conversation. Never make claims about
clinical results that you can’t back up with solid research.
11. Not Understanding the Difference

between Association and Causality
It’s easy to confuse association and causality. Here’s a simple
example. Statistics show people in the Southeastern United
States tend to have higher rates of poverty, diabetes, stroke,
and obesity, some of which are partially associated with cul-

tural practices. These problems are all associated. However,
not all of them are causally linked.
There is a strong relationship between obesity and diabetes
to the point where it’s pretty safe to say that obesity can cause,
or at least is a major contributor to, diabetes. Also, since lower
income individuals often have greater diffculty in purchas-
ing healthy food and sometimes revert to less healthy choices,
we can safely assert that poverty and obesity are also con-
nected. However, it would be stretch to say poverty causes
diabetes. Not every poor person has diabetes, and there are
factors other than poverty that contribute to whether or not
someone develops diabetes.
Also, notice that all these problems are associated
with living in the Southeast. Even though there is a link
between living in the Southeast and suffering a stroke, living
in the Southeast doesn’t require someone to have a stroke.
You can’t say that someone who moves from Chicago to
Birmingham is guaranteed to have a stroke. That reminds me
of the old joke about the guy who heard that 80% of car acci-
dents happen within 10 miles of home so he moved 15 miles
away so he wouldn’t have a wreck.
If you are trying to make the case that adopting your
product or program will improve outcomes, it’s important to
communicate that you understand the difference between
causality and association. A simple example that expresses the
difference between the two is a smoking cessation program
with several elements, each of which could be implemented
independently:
◾ A smartphone app that allows smokers to track the num-

ber of cigarettes they smoke, what activities they were
doing right before they smoked, and other factors
◾ Out-bound emails sent directly from their physician – not
using the app – twice a week reminding them of the
benefts of not smoking
◾ Pairing up participants as “buddies” so they can turn to

someone for support when tempted to smoke
◾ Once-a-month in-person group meetings to create a sup-
port community
Let’s suppose that at the end of a study that incorporates

all four of these elements, 40% of the people in the study
cut their smoking in half and another 45% stopped altogether.
The app development company would certainly like to claim
that using the app caused the decrease. But that would an
overstatement.
Confusion over association vs. causality can come into play
in a few ways in this example. The most obvious is attribut-
ing any success strictly to the phone app. It may have played
a role – perhaps even a primary role – but since there are
three other elements, we can’t say with any certainty that the
program worked because of the app. It was only one element.
The case would be far stronger if there were a control group –
an equal number of smokers who took all the same steps as
the app users did minus using the app. Then differences in
outcomes could be attributed to the app. Also the issue goes
beyond controls. There are certain accepted research proto-
cols for measuring the validity, reliability, and signifcance of a
study. Without incorporating certain accepted research prin-
ciples, scientifc research will most likely be deemed invalid.
Another confounding variable from this example is the
motivation level of the study participants. How patients were
selected to use the app could add “noise” to the study results.
If they volunteered, they obviously have a certain level of
motivation. However, if there is no control group, you really
can’t say the app caused the reduction. First of all, since the
smokers stepped up to be in the program, they had to have a
certain desire to stop smoking in the frst place. Maybe they
had tried unsuccessfully to quite a few times and, for whatever
reason, they determined to fnally do it this time. Because of
their motivation, they might have succeeded with or without
the app. Clearly, the app was associated with the success, but
there is not enough evidence to claim that results were caused
by or attributable to the app.
Recommendations:
◾ Keep in mind that physicians are trained scientists. They
are well aware of valid experimental design and will
immediately detect any softness in your presentation if you
claim your product caused the favorable result when it
may not have.
◾ If you plan to present any results of a study, be sure to run
your conclusions by a qualifed statistician, researcher, or
physician in advance and ask them what language you
can legitimately use as you present your fndings.
12. Acting with Questionable Ethics

This one is a no-brainer and should apply to every aspect of
your life. However, there is a specifc consideration in business
settings. The healthcare world is surprisingly small, for two
reasons.
◾ There are many subgroups within healthcare: physicians,

nurses, executives, physical therapist, pharmacists, lab
technicians, supply chain managers, food services directors,
and many, many more. Most of these groups have regional
and national meetings, so they typically know their peers
all across the country. And they talk to each other.
◾ People tend to move around. In the 1980s while I was in
planning department of a Midwestern hospital, I worked
with a consultant who assisted us with our market
strategy. We hit it off, but after we both moved on, we
lost touch with each other for many years. I moved to
Atlanta in 1995, and my old friend called me 12 years
ago because he was applying for the CFO position at

one of the GHA’s largest member health systems. He
wanted my thoughts. As it turns out, he got the position
and has thrived there. In his new role, he could have
damaged my reputation if he didn’t trust me. If I had
acted unethically all those years ago up in the Midwest,
my bad behavior could have harmed me many years and
several states away.
Here’s an example of how unethical behavior can backfre on

you. In the early 1990s, I worked at a regional hospital asso-
ciation in the Midwest, and we operated a medical paging
business to help physicians and hospitals. (This was obviously
long before the days of smartphones and tablets.) Due to tech-
nology changes and the evolution of the overall paging indus-
try, we decided to contract with an outside vendor to take over
the operation we had managed in-house for years.
After going through a Request for Proposal (RFP) process,
we selected an organization we thought offered the best
combination of technology, service, and fnancial terms. This
company sent a very lengthy contract flled with lots of tech-
nical jargon and technology infrastructure terms well over
my head. Apart from the terminology I didn’t understand,
the agreement looked pretty good, but I sent it to our inter-
nal technical staff to get their assessment. They came back
and told me the contract was flled with ticking time bombs
because of what they were proposing from a technology
standpoint. Our staff said there was no way we should sign
that agreement.
The company’s representative came to a meeting with me
expecting a friendly conversation where we would discuss
some minor points of the contract, but instead I essentially
threw him out of my offce and told him we don’t do business
with people we can’t trust.
Here’s another example. A close professional health system
CEO colleague – I’ll call him Kurt – related the following story.
The vendor rep of a company that offers a high-end end, very

expensive technology, succeeded in getting the medical staff
at Kurt’s main competitor to buy his product. This salesperson
then went to Kurt’s medical staff to get them all excited about
his product so they would pressure Kurt’s hospital to buy it
too. This pressure created problems with Kurt’s fnance com-
mittee and board. Here’s Kurt’s summary:
Ultimately we saw no alternative but to proceed,

even though this was not budgeted … I felt the rep
was sleazy and underhanded and would have loved
to have told him to never darken our door again.
He knew he had the upper hand as he had the only
product on the market and had drummed up interest
with our competitor.
As far as I know, Kurt did not invite this sales rep to

Thanksgiving dinner that year.
Here’s one fnal example. Recently, a healthcare C-Suite
executive complained that he had been burned more than
once after signing an agreement by a vendor who subse-
quently revealed that there were additional training or imple-
mentation costs that hadn’t been included in the project
proposal. Those should have been clearly communicated very
early in the sales process, and this executive felt he was inten-
tionally kept in the dark. Needless to say, he did not have
good things to say about this company.
Recommendation:
◾ Keep your nose clean and always act with 100% integrity
in all you professional and personal dealings. People in the
healthcare feld know each other and talk all the time. One
rock-solid mantra in the professional world is that people
like to do business with people they know, like, and trust.
You do not want them to roll their eyes in disgust when-
ever your name comes up.
13. Falsely Claiming to be the Only Company

That Offers a Particular Product, Service,
or Feature
For 24 years, part of my job working for two different hospital
associations was serving as a primary gatekeeper for com-
panies seeking the associations’ endorsements. Over those
24 years, I heard hundreds of sales pitches from wannabe
vendor partners. Of course, every company tries to stand out
from its competitors, and I soon discovered that many of them
claimed to have unique capabilities. Sometimes this was true,
and sometimes it was not.
In the day of Google and other search engines, people can
enter a few key words and instantly discover how valid those
claims of uniqueness are. If they are false, it tells me one of
two things. Either:
1. The vendor representative is so ignorant about the mar-

ket that they don’t even know who their competitors
are or what products they offer. If this is the case, I’m
not impressed by their commitment to their product or
company; or
2. The vendor knows the claim is exaggerated. If this is the
case, they have taught me that I can’t trust their word.
Recommendations:
◾ Preserve your credibility above everything else by knowing
your competitors and by providing accurate information
about your product and your position in the marketplace.
If you claim to be the leading company in a particular cat-
egory, make sure you have some legitimate statistics to sup-
port that claim. For example, “We are the largest supplier
of imaging equipment based on …” And then tell them
the basis of that claim: total number of machines in the
feld/total revenue/number of client locations or whatever
metric you are using. As I said, people like to do business

with people they know, like, and trust. Make sure you don’t
mess up this last one.
14. Jumping on the Bandwagon of the Latest

Healthcare Fad and Making Non-Credible
Claims about What Your Product Can Do
Tapping into timely issues is always a good idea. It shows you
understand the current industry stress points and have a valu-
able product to address the problem.
However, in their enthusiasm, vendors occasionally stretch
their logic beyond credulity in claiming to solve an important
issue. Let me give you an example. One of the latest “hot”
healthcare issues relates to readmissions of Medicare and,
increasingly, some privately insured patients within 30 days of
their discharge from the hospital. In order to encourage high-
quality care, the Medicare program penalizes hospitals if they
exceed the expected number of readmissions in some high-
volume Diagnosis-Related Groups (DRGs). Clearly, no hospital
wants to be dinged.
Everyone involved in the hospital sector knows this, and
many consultants and product developers have jumped in to
help hospitals with their readmissions avoidance efforts. Many
vendors now explain that using their product or service will
help hospitals avoid unnecessary readmissions, thereby help-
ing offset the cost of their product. This is a great marketing
strategy.
However, some of the marketing claims seem to push
the limits of believability. In order to have a true impact on
an otherwise avoidable readmission, a product would have
to make a true difference in patient care to the point that
someone who was destined for readmission now can stay
out of the hospitals because of the intervention. Since many
readmissions result from poorly coordinated post-discharge

care, a communication-related program that tracks patients’
recovery progress at home can legitimately claim to potentially
help the readmissions problem.
In order to not single out some of the more dubious
claims I have seen, let me fabricate an obviously preposterous
example. A food services contractor that provides a hospital’s
meals would have a diffcult time making a credible claim
that they could help avoid readmissions based on the supe-
rior nutritional value of their food. A patient is typically in
the hospital only a few days, and they obviously get fed. In
order to claim they help keep patients from being readmitted
within 30 days of discharge, the new food services vendor
would have to make the case that its food is so much more
nutritious than the hospital’s current food that a patient who
would have deteriorated after being discharged because of
the poor quality of the food while in the hospital for a few
days will now be healthier. This is a ridiculous claim that no
one would believe, and the vendor would be written off as
naïve and ridiculous.
Recommendation:
◾ By all means, be aware of the current important issues
of the day, and if your product can legitimately help with
them, make that a key part of your sales appeal. But keep in
mind that you may be hurting your case if you exaggerate
your ability to truly address the problem under discussion.
15. Not Having “Hometown Clients”

During my 19 years as the “front door” for vendors wanting
to be designated a preferred vendor by GHA, I heard many of
them complain about their poor traction in the state because
they lacked existing local customers. Some hospital leaders shy
away from being the frst one to jump in with a new approach.
Even if a vendor can claim some fairly impressive customers
in other parts of the country, some local leaders may still be
reluctant. This might stem from the legitimate recognition that
the operating climate varies a bit from state to state because
of local regulations or politics. Some requirements in Georgia
might be slightly different than those in New York. But I heard
this complaint over and over and even involving products that
would seem to immune from local differences.
Erlanger Medical Center is located in Chattanooga just a
few miles north of the Georgia/Tennessee border. A good
hiker could easily walk to Georgia from the hospital in about
an hour or so. I used to joke that even if Erlanger were using a
particular product, that might not impress hospitals in Georgia
because Erlanger is in a different state, so they don’t count.
This phenomenon is becoming less relevant as hospitals
merge and work more with other organizations, but it can still
exist.
Recommendation:
◾ There is little you can do to counter this trend. As frustrat-
ing as it is, it can be a reality, so don’t be surprised if you
encounter it.
16. Not Fully Appreciating the Lack

of “Uniformity” of Patient Inputs and,
Therefore, Overestimating the Potential
Impact of Your Solution
A common criticism of healthcare is that both the outcomes
and the cost of care vary enormously from provider to pro-
vider. Undoubtedly, some hospitals and physicians do a bet-
ter job than others, but some of the variation is beyond their
control.
One major variable is a patient’s condition upon entering

the healthcare system. About 30 years ago, in an attempt to
help patients determine which cardiologists to consider using,
the State of New York began publishing the mortality rates for
each New York cardiologist by name. One of the unintended
consequences was that patients with complicated problems
started having trouble fnding a doctor who would take them
on. The reason? Patients with the most severe conditions tend
to die at a higher rate than those with fewer problems. As a
result, physicians treating the sickest patients had among the
worst mortality rates in the states, leading some patients – and
the media – to conclude they were bad doctors. Consequently,
these high-end physicians started refusing to treat the most
severe cases so their numbers would improve.
Another sticking point relates to the degree of patient
compliance in the medical process. A physician can provide
the best care available anywhere, but if a patient only half-
heartedly follows instructions, the fnal outcomes may not be
great and the provider might be “blamed.”
These two problems greatly frustrate care providers.
Recommendations:
◾ Evaluate your descriptions of your product’s impact on
patient care. You will enhance your credibility with poten-
tial customers if you demonstrate you appreciate the
challenges with the patient part of the care delivery equa-
tion. Rather than claiming to help patients in general, you
should pinpoint the characteristics of patients most likely to
beneft from your approach. Besides allowing you to dis-
cuss credibly the possible impact of your product, this helps
the healthcare system or physician evaluate how large the
relevant patient population is and, therefore, the potential
impact of your product.
◾ If possible, point to successes other physicians or hospitals
have had using your product with their various patient
subgroups.
◾ If you are especially confdent in your product, consider

offering some kind of performance guarantee with explicit
defnitions and clear defnitions of their responsibilities.
End Note
1. Joseph Conn, “Mobile medical apps gain support, but many
lack clinical evidence,” Modern Healthcare, November 30, 2015,
page 22.
Chapter 7
Product Design Pitfalls
The frst “P” in the seven “P’s” of marketing is Price. (The others
are Place or Distribution, Positioning, Promotion, Packaging,
Pricing, and People.) But it all starts with the product. If yours
suffers from a fatal faw, it is destined for the reject pile.
This chapter advises on how to avoid some potentially
success-killing product design pitfalls.
17. Answering a Question No One Is Asking

Right after I launched my consulting company, I met an entre-
preneur at a conference who was trying to fgure out how
to introduce what he considered a sure-fre offering. (I am
substantially modifying the details of this example to avoid
embarrassing him.)
His company had deep clinical expertise and had just
completed an infectious disease project for the World Health
Organization for which he had created a rudimentary screen-
ing device to detect a certain disease with reasonable accuracy
and at a relatively low cost. Since he owned the underlying
research rights, he saw a possible opportunity to extend his
methodology to develop a commercially viable product for the
private market in the developed world.
129
He envisioned selling the more sophisticated version to infec-

tious disease doctors who sometimes treat tourists from the bur-
geoning “adventure travel” market. He saw this as an attractive
client base since there had been a noticeable uptick in people
returning from overseas with this particular disease. His prod-
uct’s demonstrably better results convinced him that it would
succeed. Consequently, he asked his team to spend another
year-and-a-half developing a sophisticated stand-alone device
that would detect the targeted disease with about 96% accuracy.
When we met, he was trying to fgure out where to start
with his marketing. The frst thing I asked was how many
physicians he thought would be potential users. He wasn’t
sure but he thought it was a big number. I then asked how
unsatisfed they were with the existing approach. Again, he
wasn’t positive, but he knew his product was better. Next, I
asked what the physicians thought of the price he was consid-
ering. He indicated that the few of them with whom he had
informally talked mentioned the price range he was thinking
about seemed a bit high.
When I saw him a year later, I asked about his progress. He
was a bit dejected. It turned out that the market for his prod-
uct was far smaller than he had imagined. Even though the
prevalence of the particular disease was growing, the con-
sequences of getting false-positive test results from the exist-
ing diagnostic technique were rather low so no one seemed
particularly alarmed. Furthermore, patients were spread across
the country to the degree that the average infectious disease
physician only saw a handful of patients with that problem
each year, and they didn’t feel the extra accuracy justifed the
heavy price tag.
His problem was his utter failure to do any kind of market
research. He neglected to determine whether there was even
a need and, if so, if it was large enough to warrant developing
what turned out to be a fairly expensive product to address it.
A technology without a viable market falls into the category of
an interesting science project.
Product Design Pitfalls ◾ 131
And just because there may be a need, that doesn’t guaran-

tee that physicians will be willing to buy it if it’s cost prohibi-
tive. Very basic stuff!
Recommendation:
◾ Do your market research! Don’t commit massive resources
to a product until you know there is a legitimate market
and that your approach fts within the range of what the
industry will accept and actually buy.
18. Developing a Product without Adequate

Input from Potential Users
Every sector can beneft by having “industry outsiders” step
in with fresh eyes to suggest new and better ways of doing
things. They can bring an unvarnished perspective to pro-
cesses and problems and possibly cross-pollinate solutions
into healthcare from other felds. The downside is that those
not familiar with healthcare may not suffciently understand
the nuances and non-negotiables of the new sector and, there-
fore, propose solutions that violate certain “must-haves” of the
industry’s philosophy or work fow.
During World War II, “Loose lips sink ships” was a popular
phase that showed up on many patriotic posters. The idea was
that if stateside family members of military personnel fghting
on the front lines openly talked about what their loved ones
were doing overseas, enemy agents might be tipped off about
military secrets, resulting in ambushed ships and lost lives.
Entrepreneurs are understandably protective of their great
concepts, especially if their idea could be easily “borrowed”
by others. This creates lips that may be too tight.
Products with few barriers to entry are especially suscepti-
ble to being hijacked. The good news is that heeding the warn-
ing to put your lips together allows you to keep your product
under wraps until just the right time. The bad news is that this
sequestration could cut you off from critical information vital to

successful product development. This can be especially danger-
ous if you have minimal direct experience in the healthcare
arena. A very secretive process can result in a product plagued
by a fatal design faw because it doesn’t match providers’ work-
fow or preferences. Or it could be answering a question no
one is asking, as illustrated by the previous pitfall.
I recall a conversation with a vendor about 10 years ago
when she was looking for a pilot site for a product that prom-
ised to streamline the billing and collections process. Although
I thought she had some very good ideas, implementing her
approach would violate one or two very fundamental “can’t be
changed” aspects of the interplay between hospital billing offces
and the insurance industry. Admittedly, the existing process
was somewhat irrational, but I had spent enough time in that
sub-universe to know that it would be easier to shift the earth’s
axis tilt from 23-½ degrees than to bring about the changes she
proposed, and I told her so. Her response: “Well, they just need
to get over it. This is the 21st century.” Nice thought, but it ain’t
going to happen. As far as I know, she never did get her pilot
site. She apparently failed to heed my advice and that of others
who told her the same thing. This example illustrates the danger
of ignoring sound advice from industry-insiders.
Recommendations:
◾ Let me repeat: Do your market research! Don’t commit
massive resources to a product until you know there is a
legitimate market and that your approach fts within the
acceptable range of what the industry will accept and
actually buy.
◾ By all means, seek new ways to streamline and even up-
end the status quo. But make sure you have got a “reality
check” from actual users as to your approach’s viability.
And get that input early in the process. As you are design-
ing your product, seek advice from people who actually
work in the exact area that would be affected and ask
for honest feedback about what works and what doesn’t.

You may have a spectacular solution – in concept – to a
recognized problem, but it’s worthless if no one is willing
to use it because of a miscalculation. You may sometimes
run into the situation where the leader of a particular area
loves your product, but the end users who report to them
may not share their enthusiasm. The customer and the
end user may not always be the same.
◾ If you have a revolutionary approach, carefully evaluate
the risk of letting potential competitors learn about it vs.
the risk of missing a key requirement that compromises
the viability of your product. You should seek industry
insiders to serve as sounding boards, and consider ask-
ing them to sign a Non-Disclosure Agreement (NDA).
Doing so would help protect your intellectual capital,
but it could also scare some potentially valuable advi-
sors away. Recognize that people can be wary of signing
overly restrictive NDAs. Some of them I’ve been asked
to sign go well beyond protecting documents, drawings,
spreadsheets, prototypes, etc. and seem to cover even
concepts, random comments, and speculation. Those are
way too off-putting. My attorney tells me that, ironically,
that type of NDA could unravel because it is so con-
straining as to be deemed unreasonable. Depending on
the extent of the involvement you are asking from your
advisors and your relationship with them, you might also
need to design a compensation arrangement to attract
and retain valued advisors.
19. Receiving Inadequate Input from Your

Advisory Board
This one surprised me. As I was talking to a potential client,
explaining how my company could help him, he mentioned
his advisory board and listed some of its members’ impressive
credentials. Having had similar conversations with other com-

panies, I was prepared to hear him say he saw no need to
work with me. With such a strong group, I fgured he had all
the input he needed. To my surprise, he said that despite the
advice he was receiving, he felt he had to get additional feed-
back. Here was his explanation.
I have known the members of my advisory board

for several years and, in some cases, we are personal
friends. I have utmost respect for their professional
judgment, but I sometimes wonder if they are telling
me what they think I want to hear rather than what I
really need to hear.
I found this fascinating. As an analytical thinker, I immediately

move toward both strengths and potential problems of an
idea. And as someone with a good sense of what I know (and
what I don’t know), I’m usually not reluctant to openly (yet
tactfully) share my thoughts. I often preface my comments by
labeling them “devil’s advocate” observations, I tell my clients
I’m the Reality Guy. By that, I mean I sometimes tell them
things they may not like hearing but need to know. It’s best to
get this type of feedback from someone who is on their side
and as early on as possible in order to make whatever mid-
course corrections are necessary.
That is what an advisory board is supposed to do. But
apparently it doesn’t always happen, perhaps because:
◾ As indicated above, the board may not want to hurt the

developer’s feelings.
◾ Sometimes advisory boards are only loosely involved
with the company. A colleague recently told me she
has been on the advisory board of a particular start-up
for three years, but the board only met one time for a
30-minute phone call. It’s hard for someone with such a
minimal relationship with the company to engage and
do serious thinking about what it does. The message

the company is sending is that they are more interested
in being able to list your credentials than truly tap into
your expertise.
◾ The company CEO’s personality might create a climate
where it’s obvious they are more interested in confrma-
tion of their ideas than in getting honest input. About
eight years ago, I served on such a board. The CEO was
the classic Type A personality and treated the advisory
board like employees, and not particularly bright ones at
that. Whenever someone would make a suggestion that
challenged one of the CEO’s pretty fundamental assump-
tions, I could see he struggled to not appear offended. He
was only partially successful. After a few such incidents,
I decided to exit the advisory group.
Recommendations:
◾ Select the members of your advisory board carefully, mak-
ing sure they have the required skillset to provide you with
complete and informed advice.
◾ Engage the advisory board in creating their own pur-
pose statement in which the team collectively agrees on
why they exist and the roles they will play. It need not be
lengthy. This document then becomes the touchpoint for
confrming that the advisory board is fulflling its purpose.
◾ Think through your posture toward your advisory board.
– Be sure you communicate repeatedly that you want
their candid input.
– Don’t make unreasonable demands on their time, but
don’t make the opposite mistake of failing to engage
them in a meaningful way.
– Consider your reactions to ideas that might seem some-
what contrarian. Sending the message that you are
looking for “yes men and women” may rob you of their
valuable insights.
◾ Make sure you don’t discourage people from joining your

advisory board. I was once asked to sign an advisory
board agreement that, if interpreted a certain way, could
have made me personally liable for the company’s actions
and decisions. Although I was happy to lend my exper-
tise to the organization, I was not willing to put myself in
potential legal jeopardy, nor was I willing to engage my
$425-an-hour attorney to review and modify the agree-
ment’s language.
◾ If you have the fnancial means, consider offering a mon-
etary compensation arrangement to give them more skin
in the game.
20. Getting Resistance from Providers Because

Your Product May Be Too Complicated
for Elderly or Non-Tech-Savvy Users
The technology breakthroughs of the past 20 years have
been astounding. Millennials have never known a world
without laptops, the Internet, and smartphones. The good
news is that every industry, including healthcare, is march-
ing forward boldly to tap into the awesome potential of these
and other technologies. In my work with healthcare start-ups,
I’m regularly exposed to capabilities that were only dreamed
of a few decades ago. Many of the breakthroughs are devel-
oped by extremely bright entrepreneurs at the early ends of
their careers.
As positive as these developments are, there can be a pretty
big downside if developers don’t recognize that not everyone
shares their enthusiasm for and comfort with emerging tech-
nologies. Parents are often astounded that even toddlers intui-
tively understand tablets and other electronic devices. Many
people over 40 consider that an acquired skill that is akin to
learning a foreign language.
I recently participated in a conference call hosted by a

wonderful not-for-proft organization I have actively supported
for many years. The president was explaining their decision
to migrate one of their smaller-circulation publications to an
electronic-only version. This publication is designed to push
out timely information that requires quick action, and the time
lags in creating and distributing it often rendered their calls to
action “old news.” Furthermore, the production costs exceeded
the associated revenue by nearly $100,000 per year. So, they
concluded moving to electronic distribution would both
increase the timeliness of the document and provide a signif-
cant cost savings.
After his announcement, the president invited questions
and comments. The frst few callers were very positive, but
one gentleman weighed in with the concern that some older
readers might be left behind. He explained that his elderly
mother had just complained loudly that her bank, insurance
companies, and other business partners keep pressuring her to
move to electronic communication only. She seldom turns on
her desktop computer, and, when she does, she has trouble
reading the screen.
Recognizing the almost-universal adoption of cell phones,
many developers design their new health products strictly for
that platform. Doing so eliminates the need for the end user
to invest in a dedicated device since almost everyone already
owns a smartphone. The problem, though, is that many
elderly patients have trouble navigating on four-inch screens
with no physical buttons. Besides lacking physical dexterity,
they may also have trouble reading the small screen print.
Some technology companies recognize this general discom-
fort some seniors have with technology and have developed
dedicated, stand-alone devices with very clear and large but-
tons to simplify operations for older patients. This addresses
the accessibility problem but creates two new barriers: your
need to invest in the device’s design and production, and the
purchaser’s need to purchase a single-purpose device.
Recommendations:
◾ Carefully evaluate the pros and cons of creating an appli-
cation designed for use on a dedicated device that is easy-
to-use for the end user vs. one that uses smartphones or
tablets. Choosing the former will add to your capital outlay
but could increase usage among people who may be wary
of technology as long as it is immediately intuitive. Going
the smartphone/tablet route will keep costs down for both
you and the end user but may discourage some poten-
tial buyers from using it because of their limited physical
dexterity.
◾ Think through the characteristics of your intended users.
Rarely are they all of the same skills, age, and interests.
Have each of these user categories weigh in on their need
and your product. It’s better to invest the time discovering
this earlier in the process rather than when you are trying
to determine why sales are not materializing.
◾ Assess every aspect of your product pretending you are
afraid of technology. What is confusing? What is intimidat-
ing? What assumptions are you making concerning the
user’s level of sophistication? Are the icons and font sizes
large enough to be read by someone with fading vision? Is
there an easy-to-access help icon?
◾ Find someone totally unfamiliar with your product and
ask them these same questions.
◾ If your app requires the user to read detailed charts or
conduct data entry, consider encouraging them to use a
tablet or laptop instead of a phone. Some people may not
have a tablet, but if they do have to purchase one, at least
they can use it for other purposes.
Chapter 8
Market Misreading
Pitfalls
Once you have designed your product that appeals to the

broader market and is one the market is, ideally, even eager for,
you must understand just who it is you’re selling to. Some prod-
ucts are extremely niche and apply to very narrow markets, but
most are applicable in many different types of organizations and
even many different sectors. Just because you have a great prod-
uct and may understand one segment of your market pretty well,
you may be missing opportunities in other parts of the market.
With only two pitfalls, this chapter is tied with the external
political pitfalls chapter as the shortest one in the book, but don’t
underestimate the ability of these two to ruin sales opportunities.
21. Failing to Recognize That the

Healthcare Field Is Not Monolithic
Newcomers to healthcare appropriately view it in big buckets:
hospitals, physicians, insurance companies, nursing homes,
etc. But they are making a mistake if they don’t subdivide the
market by other factors.
139
All hospitals are not alike. A 400-bed suburban community

hospital and a 25-bed rural Critical Access Hospital face many
of the same challenges: clinical, fnancial, demographic, regu-
latory, staffng, and many others. However, these issues mani-
fest themselves very differently to each. For example, when it
comes to physician relations, large suburban community hospi-
tals may have the challenge of physicians splitting their admis-
sions among two or more hospitals while rural hospitals may
have trouble getting any physicians in the frst place. Similarly,
various physician subgroups – primary care physicians, spe-
cialists, employed physicians, independent practitioners – face
different clinical, operational, and fnancial challenges. One
size defnitely does not ft all.
Newcomers to healthcare may not adequately differenti-
ate among these various subpopulations and, therefore, fail
to tailor their operational implementation processes, pricing
schedules, and messaging to each group. The result is missed
opportunity if they don’t appeal to each market segment in
terms it can relate to.
Recommendations:
◾ Be sure to understand the needs and dynamics of the
different sectors of your market. You should develop poli-
cies, processes, and pricing tailored to each segment of
your market. Everyone who works within the healthcare
universe understands the varied circumstances faced by
the different subgroups. A large academic medical center
understands that it will have to pay far more than a small
rural hospital for the same service, so don’t be afraid to
develop differential pricing. The key is to mentally step into
each group’s world to the point that you understand their
needs and can respond accordingly.
◾ See Pitfall 60 for advice on developing a pricing schedule
that can achieve maximum penetration among different-
sized hospitals.
Market Misreading Pitfalls ◾ 141
22. Misusing “Guerilla Marketing” due

to Misreading the Organizational Climate
Guerilla marketing involves using unconventional tactics to
bring attention to your product or service. The term was
inspired by guerilla warfare in conficts like the Vietnam War
where a small band of combatants ambush or surprise the
enemy (typically a larger, less agile army). Some people use
the other spelling – “gorilla marketing” – probably as a way to
invoke the brute force of gorillas.
This one is tricky, and I will share two stories with com-
pletely opposite outcomes. First, I will give one example of
where this approach failed miserably and then I will highlight
one where it worked fawlessly.
Over the years, part of my job responsibilities at two dif-
ferent organizations included overseeing their sales-related
functions. Once we had an opening for the manager of one
of those companies, and I had a delightful interview with a
highly qualifed applicant. He had a strong background and
presented very well. He even had some experience with sales
to physician groups. I remember telling my boss that I thought
I had found the right person.
However, two days later, our receptionist buzzed me to
tell me I had just received a package from this applicant.
When I opened it, I discovered a dozen beautiful straw-
berries covered in different types of chocolates with our
company’s logo infused into the chocolate. I was taken
aback. I had never had anyone do something like that before,
and, although I felt it was thoughtful and creative, it came
across as pretty cheesy.
I asked a few others in the offce what they thought –
and in the process “had to” offer them one of the strawber-
ries. Everyone agreed with me that this gesture really wasn’t
appropriate in an organization like ours and showed poor
judgment on his part. He lost the job over this. (I have since
shared this story with a few other professional healthcare
colleagues, and they all had the same reaction we did – his
action was a bit over the top.)
Having relayed this story, let me give you an example that
had the opposite effect. One of my clients told me about a
time when she tried several times to get in to see a depart-
ment head in a healthcare organization she was targeting. He
was new to the position, but my client had met with his pre-
decessor and knew the department’s administrative assistant.
After trying for the third time to set a meeting with the new
department head, his assistant mentioned off-handedly that he
was in the middle of a week-long culinary tour of Napa Valley.
This triggered a creative thought for my client, and when
the department head returned to the offce, he discovered a
bottle of fne, 28-year-old balsamic vinegar from my client
awaiting him. As a fan of fne foods herself, she knew the
department head would appreciate the gift. As it turns out,
that did the trick, and she was able to penetrate the veil and
eventually made the sale.
Recommendation:
◾ I’m not sure what to tell you. These anecdotes demonstrate
that guerilla tactics can either be spectacularly successful
or blow up in your face. My advice would be to carefully
think through how this approach might come across and,
if possible, get some insights from others in the organiza-
tion as to how such an approach might be received. When
in doubt, don’t do it!
Chapter 9
Data Pitfalls
This is one of my favorite chapters in the book. I cut my teeth

professionally on healthcare data and truly enjoy seeing how
relevant and reliable data can be used to generate key insights
into healthcare delivery. However, just like every other area of
healthcare, there can be treacherous seas to navigate when it
comes to acquiring, analyzing, and presenting data and in help-
ing prospective customers understand the great potential of your
data-related product to support their effort to achieve their goals.
23. Having Someone Challenge the Quality

and Integrity of Your Data, the Relevance
of Various Data Sources Brought
into a Big Data Project, or the Validity
of an Index Number You Create
These can be signifcant issue for any data-related project.
There are fve types of healthcare projects that involve data:
1. Non-clinical projects – Examples include studies of patient

origin, Emergency Department (ED) throughput, where
patients are discharged to, and others. Although data
143
accuracy is important for any data project, minor data

discrepancies are not fatal for this type of study.
2. Clinically oriented projects using non-clinical data –
Administrative data like the UB-04 medical claims bill-
ing set or the MedPAR data set can be used to draw
important insights about clinical care, but it is not com-
plete enough to offer defnitive conclusions. This data
can be used to study admission patterns, length of stay,
and clinical classifcation of patients. However, without
either supplementing the data with more clinically robust
information or performing sophisticated adjustments to
account for patient severity and other factors, this data
is not appropriate for drawing medically valid conclu-
sions about providers’ medical or economic performance.
Physicians typically bristle over unsophisticated studies
based solely on this type of data.
3. Big Data projects – Big Data is routinely used in many
industries, and healthcare is beginning to incorporate it
more and more. By defnition, Big Data combines data
from various sources, and someone has to determine
the relevance and appropriateness of the combina-
tions. A related concept is the Data Lake, a large, semi-
structured repository of various types of often-raw data
that the owners hope to use for a variety of reports,
analytics, and machine learning.
4. Projects that create any kind of index – Years ago, I
headed up one such effort relative to hospital fnancial
effciency. The charges listed on a patient’s hospital bill
come from an internal data set called the Charge Master
fle. There are reasons charges are set as they are, but
they are largely meaningless to most patients since very
few actually pay charges.
In an attempt to help a local healthcare business coali-
tion compare hospital pricing, several years ago, I led an
initiative to create a new way to look at hospitals’ eco-
nomic effciency. We attempted to identify and assign a
Data Pitfalls ◾ 145
weight to several fscal and performance indicators to

come up with a single, fnal number that would accurately
determine fnancial effciency and allow hospitals to be
compared. Among the factors we discussed were the hos-
pital’s clinical mix, overall payer mix, severity index, and
several other measures.
After hours of discussion over several meetings, we
fnally abandoned the effort because we determined that
any weighting approach we came up with would be arbi-
trary and based primarily on our opinions. Should payer
mix count more than patient severity? Who knows? Even
economists and statisticians who spend years analyzing
data can’t agree on optimal composite measures. How
could we have come up with a meaningful and accept-
able index number?
5. Well-executed analyses using rich clinical data appropri-
ately collected and cleansed.
Recommendations:
◾ You should be very humble when discussing projects or
products that draw on data from any of the frst four cat-
egories. There are three important considerations that limit
the validity and applicability of such studies:
– The data collection process – How complete and accu-
rate the data is. Generally, UB-04 data is fairly com-
plete since it spins out of the hospital’s system using
automated processes. Other studies that involve manual
collection might be subject to different types of errors.
For example, bad data could creep into a study of dis-
charge disposition from manually collected data on a
particular unit if the weekend staff is not fully trained
in the study’s objectives and data collection techniques.
If defnitions are not crystal clear, some might interpret
them differently, and some may feel overwhelmed by
their workload and not spend the time needed to pro-
vide accurate or complete responses.
– The degree of data cleansing applied – All data sets

are subject to errors. Generally, vendors using UB-04
data apply numerous algorithms to ferret out problem
records such as men giving birth, patients being dis-
charged before they were admitted, or patients older
than 125. Furthermore, if you are involved in a multi-
year study, you can compare results of this year’s data
set to those of previous years to look for major changes.
Most analyses such as payer mix, patient origin by zip
code, market share by region, and others stay pretty
stable from period to period. Signifcant changes from
one year to another could signal underlying data
issues.
– The logic behind your Big Data project or any effort
to create synthetic indices or draw conclusions – You
must be prepared to defend your thought process. For
example, does someone’s traffc violation record shed
any light on their likelihood to develop cancer? Maybe
yes, but probably not. Do you have any external, sta-
tistically valid verifcation for the analytical framework
you are proposing?
◾ Be sure you communicate to any potential critics that you
understand these limitations. Present your analyses as
starting points for discussion. With thousands of potential
analytical points to examine, a healthcare organization
could spend thousands of hours studying every possible
factor for a quality improvement program. However, these
studies can identify the specifc areas that appear to be
outliers and that warrant additional research. No one
should be hired or fred based on any of these starting
point analyses.
◾ You should also keep in mind sample size for each cell in
your analysis. Clinicians are most likely to accept statisti-
cally signifcant results, but these require a large sample
size. Few hospital departments generate enough data to
allow for statistically signifcant results. You should always
be mindful of how many cases are being compared for

each group. If you are studying outcomes of a particular
procedure by physician, you don’t want to suggest com-
paring a physician with two cases to one with three cases.
Results will be highly unreliable, and the physicians will
not be pleased.
◾ Be prepared for pushback. Even with thoughtfully devel-
oped projects with defensible logic, some clinicians or
executives may object to the results if they come out looking
bad. It’s human nature to try to defend your performance,
and since no analytical approach is perfect, every analysis
is subject to challenge. Following the guidelines presented
here will allow you to develop thoughtful responses to the
criticisms.
24. Having the “Age” of Your Data Challenged

This is related to the previous pitfall. Perhaps the most com-
mon complaint of any data project is that it’s using old
data. The dream of any analytical project is real-time data.
Unfortunately, for a number of reasons, this is virtually impos-
sible to get.
About eight years ago, I led a team to create a project that
allowed hospitals to compare, within the limits allowed by
antitrust laws, their payments from individual managed care
companies by individual product lines. One of the frst chal-
lenges was defning what data we would use and how to
collect it.
There were many antitrust parameters we had to oper-
ate within, one of which was that data had to be at least
three months old. We elected to have two six-month report-
ing periods a year for this project. Because of how hospital
payments from managed care organizations work, it can take
months for a claim to settle. For example, if a patient is dis-
charged on January 1, it can take a few weeks for the full bill
to be assembled from the various departments that provided

care. Insurance companies are supposed to fnish processing
a so-called clean claim within a few weeks. However, a large
percentage of claims have issues of either missing or incor-
rect data, so the payer returns the claim for correction. This
back-and-forth can take several weeks or even months. The
hospitals participating in our project strongly wanted to con-
sider only “complete” claims, and as a result they directed us
to allow a total of six months for the claim to fully settle.
After the hospitals submitted their data, it took about three
months for us to cleanse the data, verify its accuracy, and
upload it into the analytical software we developed.
So, this is what it looked like when you add all the time-
lines together:
◾ Reporting period: January 1–June 30, Year 1

◾ Because some patients in the reporting period were dis-
charged on June 30, the six-month allowance for all claims
to be fnalized is not over until December 31, Year 1
◾ Processing time: January 1–March 31, Year 2
This means there is a nine-month lag between the most recent

discharges (June 30 of Year 1) and a lag of 15 months for the
oldest discharges (January 1 of Year 1). Clearly, this is much
longer than anyone would like, but the nature of the process
required that much time.
Several hospitals complained about the age of the data,
so about a year into the project we pushed hard at one of
our users’ group meetings to get them to agree to reducing
the claim settlement time from six months to four. Try as we
might, they insisted on keeping it at six for fear that some of
the more complex claims would still be in fux.
As an aside, we tried to convince them that even if there
were a few unresolved claims, it probably would not affect the
results very much. We were never able to quantify the number
of claims unlikely to close within four months, but it had to be
a very small percentage. And since the project was designed to

help hospitals understand how adequate or not their payments
from managed care plans were, the center of gravity of the anal-
ysis was on the more “standard” cases, not the outliers that were
represented by the cases that required the extra two months.
Furthermore, even if the data would have been slightly distorted
by the omission of the most severe cases, I made the case that
the data across all hospitals would probably be pretty much
“equally distorted.” In other words, if 1% of cases – the most
complicated ones – were missing from Hospital A’s data, the
total payments Hospital A received from a particular health plan
might be understated by, perhaps, 2%. But the same would most
likely be true for Hospital B. Its 1% missing data would probably
also result in a 2% understatement. So, the overall comparison
among the hospitals would not be materially affected. I thought
my explanation was brilliant, but apparently no one else did,
and the group insisted on keeping the window at six months.
Recommendations:
◾ There is no way to hide the fact that data in many
comparison projects is older than everyone would like.
Acknowledge this as a problem, but walk through the
mechanics of why that is the case. To the extent that their
own institution “contributes” to the delay because of the
steps they have to follow, explore whether or not they can
speed up the process themselves at all. As in the man-
aged care data project case, it’s probably not likely they
can materially improve the turnaround. Explaining this
dynamic doesn’t solve the problem, but it at least helps
them understand that the timelines are dictated by circum-
stances beyond everyone’s control. Furthermore, it shows
that you are aware of and understand this reality.
◾ Very tactfully point out that, although your project may
use old data, there’s no better alternative. So, they have a
choice: settle for a less-than-perfect project or use nothing.
◾ You may want to consider using a daily claims feed,

which is what payers receive to get closer to real-time infor-
mation. However, recognize that this set is highly unedited,
and data integrity could be a real issue.
25. Lacking Local and/or Regional Peer Data

for Benchmarking
By defnition, benchmarking projects involve comparing one hos-
pital’s or physician’s results to those of external reference points,
either other individual providers or composite averages. So,
whenever someone suggests that type of project, the frst ques-
tion everyone asks is, “What other organizations are part of this?”
The need for relevant participation pools is crucial for
two types of projects:
1. Those that track real-time availability of a particular level

of care, such as rehab facilities. These projects allow
hospital discharge planners to see immediately who has
availability and who doesn’t. Ideally, every relevant pro-
vider in the market should participate to allow immediate,
accurate information. I will further address this type of
project in Pitfall 67
2. Data projects where you are comparing results among
relevant peer groups
As we developed the comparative managed care payment

product described in the previous pitfall, the most common
question we got was, “Who else is doing this?” It was the
classic “chicken and egg” scenario. Everyone tends to stand
around the edges of a circle and say, “I’ll do it if you do too.”
Other hospitals reply “No, I’ll do it if you commit frst.” At
some point, nothing happens unless a few are willing to step
up and commit.
We hit on the strategy of soliciting conditional commit-

ments – asking a hospital to agree with a provision to “uncom-
mit” if we failed to achieve critical mass by a specifed date.
We developed a one-page non-binding Letter of Intent asking
the hospital to give us permission to publicly announce their
intention to participate with the understanding that we would
evaluate commitment level at the particular date which was
about six months out. If we had suffcient participation, we
would move forward. If not, everyone could walk away. No
harm, no foul.
The strategy worked perfectly, and we successfully
launched the program right on schedule.
Here’s another important aspect of peer grouping. The
main objective of our managed care project was to allow
hospitals to compare the level of their payments from man-
aged care plans to an aggregated, blinded grouping of other
hospitals. Of course, everyone was most interested in what
was going on in their local market, but we also wanted to
allow them to compare themselves to other similar hos-
pitals in other markets, so we let them select their own
peer groups as long as they complied with our strict guide-
lines for peer group selection. This meant a hospital could
choose all the hospitals in its particular market, or it could
select similar size hospitals in other markets. This allowed
a large teaching hospital in Atlanta to create a peer group
consisting of other large teaching hospitals from the total
participant pool.
Recommendations:
◾ If your product requires broad participation of differ-
ent institutions, follow the non-binding Letter of Intent
strategy.
◾ If you are operating in different geographical markets,
consider allowing multiple peer groupings hospitals can
select.
26. Getting Trapped by the “Alarm

Fatigue Syndrome”
Data is good. More data is better. At least that’s what some
people think. Although there is some truth to that position, at
some point, too much leads to overload and inaction. There
is a difference between the volume and the value of data, and
more data doesn’t automatically lead to better patient or opera-
tional outcomes.
In an interview published in the April 30, 2018 issue of
Modern Healthcare, Allscripts CEO Paul Black discussed
data that is not properly managed, harmonized, and de-
duplicated. His comments referred to assimilating Big Data
feeds that incorporate information from several sources, but
his remarks apply to all of healthcare data. “It’s like reading
the New York Times, Wall Street Journal, and C-Span all at
once,” he said.1 Without an interpretive framework, data is
just noise.
Anyone who has spent any time in either an inpatient or
ED setting has heard numerous alarms happily chirping in the
background and being ignored by virtually everyone. Many
electronic gizmos that are part of patient care these days
sport alarms to alert caregivers when some kind of threshold
is exceeded. And these thresholds are exceeded regularly. By
many devices. And they are sometimes ignored. If everything
becomes urgent, nothing is urgent.
When medication management software for physicians
frst hit the market, there were so many low-threshold alerts
about dosing and potential interactions that many physi-
cians learned to click right through them and essentially
ignore most of them, defeating the alerts’ purposes. In
some cases, they missed truly important warnings, resulting
in patient harm. This has also been a problem with Clinical
Decision Support software and Electronic Health Records
in general.
Patients may think it’s wonderful that their primary care

physician can access the steady stream of heart rate and other
biometric data from their wearable ftness monitors, but no
physician has the time – or desire – to sort through tons of
undifferentiated data. Even getting a condensed daily feed of
summary data can be overwhelming unless there is an ana-
lytical overlay to alert the clinician when action is required.
The best apps provide clear alert systems (e.g., color-coding
patients as green, yellow, or red) so someone from the phy-
sician’s staff can quickly identify the patients who require
immediate attention.
Recommendations:
◾ Be very careful about the volume of alerts and fags your
product offers. Too many marginally important ones will
result in clinicians ignoring all of them, even the ones that
are truly critical.
◾ If you are a vendor offering a product that greatly
increases data fow to physicians or hospitals, be sure to
solicit input from relevant clinicians concerning the types
of information that are truly helpful.
◾ You must include an analytical framework that
provides immediately identifable intervention
thresholds.
◾ Incorporate the ability to conveniently modify alert thresh-
olds so clinicians can customize notifcations to match
their preferences.
◾ Develop mechanisms that guide clinicians toward suitable
corrective steps so they can immediately recognize the issue
and easily intervene. Remember that beyond being valid,
data must also be useful and actionable.
◾ As you present your product, make sure you communi-
cate that you understand the difference between volume
of data and value of data that has been curated and
analyzed.
27. Not Recognizing Hurdles in Getting

Permissions to Access the Healthcare
Organization’s Data
Some data-related initiatives such as Big Data projects or
highly focused studies that need detailed data sets not avail-
able in normal output fles require accessing internal data.
Because of growing concerns about data security, healthcare
organizations are increasingly reluctant to make any data avail-
able to third parties. The more outside organizations with their
data, the greater their exposure. Hence, they are increasingly
cautious about being drawn into such initiatives.
Recommendations:
◾ As you approach a healthcare organization about possibly
joining your program, make sure your contacts know you
understand their sensitivity about making data available
and fully support their decision-making process.
◾ You must present a strong description of your data-
handling and security policies and processes.
◾ Recognize that most healthcare facilities will require a
lengthy documentation and validation process before
granting any access to their data. Not only does this
require additional time, but you may also have to modify
your security standards to satisfy their requirements.
Bonus Material – The “Art” of Interpreting Data

Using “art” and “interpreting data” in the same sentence may
seem as sensible as comparing an octopus to a bicycle. Isn’t
data supposed to be objective? So how and where does the
“art” part come in.
Years ago when I worked in the planning department of
a Midwestern hospital, I became a huge fan of healthcare
data using the revolutionary-for-the-time Market Planner and
Physician Practice Planner software developed by the original

Sachs Group. It combined various data sets and use rates to
create precise projections of future inpatient, outpatient, and
physician services need fve years into the future.
Despite the software’s mathematically driven underpin-
nings, interpreting and applying the data required a light
hand. I followed these fve principles:
1. Recognize data and methodology limitations – Although

we used the best available data, it still had some degree
of error, especially when it came to showing the number
of physicians already in the market due to fairly incom-
plete data. Also, since the model employed patient use
rates from all of a 20-county area, it assumed behavior
in my market would mirror that of the whole region.
That’s probably a good assumption, but it does intro-
duce some fuzz.
2. Rather than talk in terms of absolute need, indicate the
direction of the need. Some medical specialties were pre-
dicted to have a future surplus of physicians while others
indicated the need for more. In other words, the analysis
pointed to either an excess or a defcit.
3. Coupled with this, emphasize the magnitude of the need.
Is the need slight or signifcant?
4. Next, look at the context of the overall market. Can physi-
cians from other specialties provide the same services for
a specialty with an indicated defcit? There may be a def-
cit of internists, but extra family practitioners can address
much of that need.
5. Finally, when reporting, rather than treating results with
mathematical certainty, use terms like “the model suggests
a market need” or “there does not appear to be a need
for additional cardiologists.” This shows an appropriate
recognition that, although the results are reasonable, they
are not bulletproof. I have seen more than one belliger-
ent physician or healthcare organization executive make it
their personal mission to undercut the results of a mod-

eling projection they didn’t like. Using more “humble”
language helps soften some of the criticism.
So, here’s an example of how to apply all this. If an analysis

of a particular market shows the need for 4.2 pediatricians,
I would explain that the initial analysis suggests a need for
pediatricians, and apparently it is pretty strong. However,
before I send the physician recruiters to get four more pediatri-
cians, I would crosscheck the supply of family physicians and
internists. If those specialties have excess capacity, it is likely
that some of the need for pediatricians already is and will
continue to be flled by the complementary specialties. And
four might be overly aggressive. I would be more comfortable
recommending one or two. Besides, the reality is that fnding
four more pediatricians would be very tough. The action point
would be starting the recruitment process in hopes of attract-
ing one or two more pediatricians.
So, the art of interpreting data involves a degree of humility
over the limitations of the data and modeling approaches plus
a nimble hand when fnalizing recommendations. You can’t
eliminate all criticism from people who don’t like the mes-
sage, but don’t give them additional ammunition with which to
shoot the messenger.
End Note
1. Rachel Z. Arndt, “EHR systems evolving with the times (and
needs), Modern Healthcare, April 30, 2018, page 16.
Chapter 10
Technology Pitfalls
If the last chapter was my favorite, this one is the one I was
most nervous about. Although I thoroughly understand how
important IT is and how effective IT management supports an
organization’s objectives, I am not an IT guy myself. My ner-
vousness stems from the very technical nature of the subject
and the fact that it is ever-changing. I’m thankful for the several
CIOs and other IT experts who reviewed this chapter and sug-
gested additions and corrections that assure the advice is sound.
⭆
Top 10
28. Introducing System Security
and/or Privacy Vulnerabilities
Anything that potentially compromises a healthcare organi-
zation’s IT network or data security raises all kinds of red
fags. Providers thoroughly understand the absolute need for
iron-clad security and the negative impact if their healthcare
network (hardware, software, medical devices, etc.) or organi-
zational/patient data are compromised. Of particular concern
is patient data that is designated Protected Health Information
(PHI) and which falls under Health Insurance Portability
and Accountability Act (HIPAA) and other related laws and
157
regulations. Healthcare trade publications regularly report on

massive data breaches, sometimes involving hundreds of thou-
sands of records, and providers know all about the fnancial
and reputational damage these lapses create.
Healthcare organizations’ concerns are heightened when-
ever someone pitches a service that involves storing or access-
ing PHI offshore. Data handling requirements can vary wildly
from country to country, and providers get understandably
nervous at the prospect of their data taking an overseas trip.
For many providers, proposing a project involving the interna-
tional transfer of data is a non-starter.
Recommendations:
◾ Do not underestimate providers’ obsession with security as it
related to PHI and HIPAA! They won’t give you a second look
if they suspect your security processes are in any way sloppy
or subpar. Go the extra mile when it comes to establishing
your data security standards, policies, and procedures.
◾ Provide thorough documentation of your security proto-
cols, results of your penetration testing, and examples of
how your organization handles PHI.
◾ Where needed, share with prospective clients your plan
and the tools you use to ensure that application and hard-
ware security updates and patches are up-to-date.
◾ Stress your eagerness to work with the facility’s security
staff or other vendors to make sure they are completely
comfortable with your approach.
◾ Avoid at all costs using offshore data storage.
29. Failing to Offer a Product That Is State-

of-the Art Technologically
Although they do not necessarily want to be on the “bleeding
edge” of technology, most physicians and healthcare organiza-
tions want state-of-the-art products or services. They tend to
Technology Pitfalls ◾ 159
look favorably on organizations that offer innovative yet stable

technologies and which can demonstrate a sustainable growth
pattern.
At the other end of the innovation curve are “dead end”
products. Major acquisitions or upgrades can be disruptive,
and few organizations want to have to repeat the installation
or updating process by buying a soon-to-be-obsolete technol-
ogy. Therefore, they often write off vendors with products
built on older technology platforms.
Smaller vendors may not have the resources to constantly
update their product lines. This can be especially problematic
when the IT feld experiences a wholesale technology change
or when operating systems are no longer supported by the
manufacturer. Larger vendors can often afford to rewrite and
upgrade their more popular programs to take advantage of the
latest platform, but this may not the case for smaller ones.
Years ago, I had the chance to buy into a partnership that
was considering buying the assets of a healthcare claims pro-
cessing company. When I went to see what the company actu-
ally had to sell, I was shocked to see green-bar paper printers
and ancient computer monitors that were hard-wired to a giant
CPU with minimal computing power. The equipment looked
like leftovers from a bad 1960s sci-f movie. Since the hard-
ware was so antiquated, I concluded the company’s only real
asset was its list of current clients, so I (wisely) passed on the
purchase offer. This was an extreme case of a company with
non-viable assets. Other companies may have a product that is
one or two generations behind the leaders. They will certainly
not be perceived a market leader, but they can still be success-
ful with certain clients and with the right approach.
If you offer services that are not central to the organiza-
tion’s core mission but are still serviceable, you may be just
fne. Examples include a pneumatic tube system for transport-
ing certain supplies; a facilities tracking system that records
building maintenance, repairs, painting schedules, and the
like; telecom systems; and customized systems for research.
Recommendation:
◾ Recognize that most healthcare organizations want
the latest and greatest. But if your product is more of a
“workhorse” product like the organization’s copiers, its
supply chain software program, or a bed-tracking pro-
gram, something less than market leadership may be just
fne. Even if it doesn’t have to be incredibly innovative, it
must still be robust and dependable. Also, keep in mind
that if your offering is perceived as delivering less than
the latest capabilities, you must make concessions – like
very favorable pricing or enhanced servicing beyond
what others offer – to be successful. If you’re not cutting
edge, you can’t hide the fact, but that maybe OK for cer-
tain products.
30. Offering a Product or Service That Taxes

an Organization’s Infrastructure, Thereby
Introducing the Need for Additional Capital
Requirements and/or Delays
Many smaller healthcare organizations have patched-
together IT systems and little-to-no onsite technical sup-
port. Some high-end data projects like implementing an
EHR can place signifcant demands on their technological
capabilities. Decentralized radiology Picture Archiving and
Communication System (PACS) technology is particularly chal-
lenging, especially if data is stored locally or if the system
is formatted in a way that makes it dependent on particular
hardware.
If your product would require your target healthcare organi-
zation to conduct hardware upgrades, the worst-case scenario
is that it decides to pass on your project. However, if you are
fortunate, it may agree to move forward, but the upgrade will
add cost and extend the implementation timeline.
Technology Pitfalls ◾ 161
Recommendations:
◾ Consider offering a less technologically demanding version
of your product that might create fewer technology inter-
face issues.
◾ Build the possibility of a delay to upgrade infrastructure
into your projected timelines.
◾ If your product or service requires specifc infrastructure
upgrades or add-ons that many clients may not have,
consider partnering with a vendor that can provide these
additional requirements at a discounted rate as part of a
more “ full service” solution.
31. Offering a Product That Does Not Interface

with Other Technologies Such as Existing
Systems or Devices
While some technologies are designed to run in a stand-alone
mode, in today’s world most healthcare organizations want
technologies that are fully integrated in a secure manner.
Some technology products tackle a very tightly defned clinical
or operational issue without addressing larger related issues.
So, if a healthcare organization implements the solution,
although it may be solving a particular narrow problem, it
may have to continue following the old process for the larger
picture, which has not been addressed.
A related problem is designing an IT application with func-
tionality that should interface with other internal healthcare
organization technologies but doesn’t because of the underly-
ing interoperability problems. Some programs such as post-
encounter tracking apps work best when data from visits is
automatically dumped into the app. The need for these inter-
faces creates an expensive challenge for the app developer
who must create separate bridges for each of the major EHRs.
And if a particular hospital uses a non-supported EHR, this
lack of bridging ability may mean they are not a viable target
client. Without automatic data transfer, the healthcare organi-
zation would be forced into manual data entry, which will kill
most projects.
Integrated systems are generally best for operations, but
standalones have the advantage of fewer security concerns
since they are not linked into any other applications. However,
this is becoming less and less of an advantage as most health-
care organizations expect any application to have strong secu-
rity while being open to interoperability with other relevant
systems.
Recommendations:
◾ Determine early on the extent to which your product
should interface with other operational processes and
technologies within the healthcare organization. It’s easier
to properly design or confgure your product right from the
start rather than having to do multiple retrofts.
◾ Where appropriate, seek ways to integrate your technology
into healthcare organizations’ typical systems and infra-
structure confgurations, but anticipate the security con-
cerns this raises and address them in your offering.
◾ Recognize that integrating your technology into other
systems can be quite costly and time-consuming. Since
healthcare organizations use various EHRs and other
data systems, multiple bridges or interfaces may have to be
developed. And keep in mind that some vendors are highly
non-cooperative when it comes to assisting other vendors
to interface with their programs.
◾ Wherever possible, offer both the option to automatically
integrate or not. Obviously, a non-integrated approach
can minimize the effectiveness of an app if the data is not
automatically available. The alternative is to move ahead
with a process that requires additional staff time for man-
ual data transfer.
Chapter 11
Communications Pitfalls
You can have a world-class product and a great understanding

of the market, but if you are unable to clearly communicate with
your target clients, your success will be limited at best. The fact
that this chapter highlights 13 pitfalls demonstrates how many
ways there are to get it wrong. Don’t let any of these sideline you.
32. Offending the “Mission” Aspect

of Healthcare
Healthcare delivery enjoys a very long history rooted in
service and sacrifce, going back centuries. As a matter of
fact, while others in ancient Rome were feeing urban areas
because of the deadly plagues, early Christians developed a
reputation for compassion because of their willingness to stay
behind to take care of the sick and dying, even at their own
peril. Over the centuries, the church established many hospi-
tals, and since then many not-for-proft mission-driven health-
care organizations and for-proft companies have joined them
as part of the contemporary American healthcare landscape.
All of these institutions are dedicated to addressing patient
needs and providing high-quality care.
163
Anyone relating to the healthcare sector would do well to keep

the altruistic aspects of healthcare delivery front and center. This is
especially important with religiously sponsored organizations.
Let me tell you about an unfortunate incident from early
in my career. I was working in the planning department of a
Midwestern hospital. As a Christian, I always try to live out my
faith, sometimes more successfully than others. Apparently,
some of my motivation shined through enough that after
working at this hospital for about a year, I was invited to serve
on its Mission Effectiveness Committee. I had become a good
professional friend of Sister Suzanne, the nun who led the
group. The committee was charged with ensuring that the
sponsoring order’s values were integrated into the hospital’s
operating policies and procedures.
One of my major projects during my second year at the
hospital was leading its planning efforts around the geriatrics
service line. We considered a number of aspects including the
demographic trends of our service area, the number of seniors
we were currently serving, and the number of physicians and
other clinicians who specialized in caring for older patients.
As I was preparing my slides to present our plan summary
to the committee that oversaw the geriatrics service area, I
included bullets listing our fndings followed by a concise
recommendation. As it turned out, I selected an unfortunate
term – “The Bottom Line” – for my summary conclusion for
each slide. What I was saying was, “As we consider the various
aspects of the demographic changes our market is experienc-
ing, as identifed in the bullet points, here’s what it all adds up
to.” What Sister Suzanne heard was, “All we care about is the
bottom line of how much money we will make.” That was not
at all what I was saying, but that’s what she heard. And that’s
what mattered in this situation. It took a couple of one-on-one
meetings with Sister Suzanne to recover from this incident, but
I fnally got back on good terms with her.
This was an extreme and rare example, but it still serves as
a cautionary tale.
Communications Pitfalls ◾ 165
Recommendation:
◾ Be sure to assess the climate of any provider organization
and the key individuals with whom you will be dealing.
Many organizations expect a no-nonsense, hard-hitting
approach, and being direct is appreciated. In other cases,
as in my experience with Sister Suzanne, you need a
much gentler hand to not offend the “mission aspect.”
Do your best to discern the most appropriate approach
and be ready to modify it on the fy if necessary.
⭆
Top 10
33. Not Being Able to “Break Through
the Clutter” and Even Get a Hearing
Since this pitfall represents one of the toughest challenges
you will face, it may be the most signifcant one in the entire
book. Getting on a senior executive’s schedule or even getting
them to pay attention to your emails is extremely diffcult.
Schedules
All healthcare leaders are extremely busy. It’s not unusual for
senior executives to have to attend early morning physician
meetings, work all day in the offce, and then attend an eve-
ning professional or community meeting. Then, executives
with operational responsibility often have evening or weekend
on-call responsibilities on a regular basis. The more complex
the environment, the more demanding the schedule.
Let me give you an example of how hard it can be to set
a meeting with some C-suite people. I am the treasurer of the
Georgia Health Information Network (GaHIN), the statewide
health information exchange. I also chair GaHIN’s Financial
Sustainability Committee. When GaHIN was just getting started,
as Financial Sustainability Committee chair, I had to inter-
face with the Technology Committee chair. The Technology
Committee would investigate the technical viability of various
products and approaches and decide which ones to pursue.

Then the Financial Sustainability Committee was charged with
handling the business relationship with the vendors.
The Technology Committee was chaired by the CIO of one
of the area’s biggest health systems. She and I are friends, and
she fully supported the relationship between our committees.
Despite a personal relationship with her and an agreed-upon
mission, I had great diffculty getting in to see her. Her assis-
tant would explain that she had back-to-back meetings and
that her frst available time might be two weeks out. And this
was for a meeting with someone she knew well and for a pur-
pose she fully supported.
With a schedule like that, how likely do you think it would
have been for an unknown vendor to get in for a “cold call”?
And unannounced drop-in visits are not necessarily a good
idea either. Many executives feel that just showing up is pre-
sumptuous and might guarantee that future meeting requests
will be ignored.
Emails
Like most people, healthcare executives get hundreds of
emails a day, most of which they ignore. One of my profes-
sional colleagues has worked both sides of the vendor equa-
tion. For several years he led a state hospital association’s
services company helping their endorsed vendors in their vis-
ibility and promotional efforts. Later he worked as a hospital
CEO. So, he knows what vendors want and what CEOs are up
against. As CEO, he was constantly bombarded with emails of
every kind. Out of frustration, he fnally asked his assistant to
track how many emails he got each day and was amazed to
learn that the average daily count during one week was 360.
Yours might have been one of them.
A few years ago, I heard a hospital CIO explain what
his day was like. When he got to the part about emails, he
fashed on the screen a few of the many, many emails he gets.
Interestingly, almost every one began with some variation of “I

hope you’re doing well.” He commented that, if he ever sees
that as the frst line in the email’s body (assuming he even
opened it in the frst place), he immediately hits “delete.” I had
never detected this pattern, but after his presentation, I started
noticing that he was right. Many unsolicited sales-oriented
emails I receive actually do start that way.
Another thing he pointed out was that many vendors try
to get into his offce by saying, “I only want ten minutes of
your time.” He said that comes across as pushy, and it’s never
just ten minutes. One respected CEO I know used to have his
assistant interrupt his “only ten minutes meetings” at the ten-
minute mark to remind him of another obligation.
Using Leverage
This same CEO recently listed three factors that would make
him more likely to agree to a vendor meeting:
1. If the vendor company offered a broad array of products or

services and the CEO was trying to leverage the hospital’s
position to receive concessions as one of the company’s
major clients – He found, though, that some of the mega-
companies are so siloed that, despite being under a single
corporate umbrella, it was tough to get them to think across
their entire product line and offer signifcant discounts.
2. If a potential purchase represented a major expenditure –
Such a meeting would allow for detailed discussions and
information gathering so he could evaluate this product in
the context of potentially competing ones.
3. Upon the request of someone he respected such as a peer
executive, another senior manager, an infuential physi-
cian leader, a department manager, or even an existing
vendor with whom he had a good relationship – In some
cases, a timely referral from a peer or colleague can even
interrupt a vendor selection process close to landing and
result in the healthcare organization selecting the last-

minute candidate.
Recommendations: As I said, this is a tough obstacle to

overcome, but here are some of suggestions. As you read
through the following recommendations, you will see that
many of them are based on having or enhancing some kind
of relationship with the person in the organization. Some
sales executives have very high sales goals that involves a lot
of “hit and run” type contacts. That strategy involves a set of
dynamics different from what is presented in some of the fol-
lowing bullet points:
◾ See if you can tap into one of the three dynamics men-
tioned above.
◾ Be extremely respectful of healthcare leaders’ calendar
and time. A physician friend mentioned that she was sur-
prised at the number of times she would agree to a vendor
appointment only to have the person neither show up nor
call ahead to cancel. How likely is she to accept a future
meeting request?
◾ If you are fortunate enough to get on their calendars, be
friendly but direct and professional, and be sure to stick
within your allotted time to make sure you aren’t “black-
balled” from future meetings. In fact, you might consider
only using one-half to two-thirds of your scheduled time to
allow for a late start or an interruption. If you wrap up early,
you can use the remaining time for relationship building.
◾ It’s always a good idea to verify at the beginning of the
meeting how much time you have and fnd out if anyone
will be leaving early. Keep in mind how much time you
have and continually refocus the conversation to the main
points if you start running out of time. Some attendees will
arrive late, or the cordial portion of your meeting may run
longer than expected, and you do not want to be rushing
the most critical parts of your pitch if key participants have
to leave the meeting early.
◾ If you have limited time, stick to your “elevator pitch,”

and highlight one or two aspects that may warrant
additional discussion. At the end of the time, ask if the
executive would like to continue the conversation, and
then suggest that there might be someone better suited
for the next meeting. One healthcare organization CEO
commented this approach shows courtesy to the execu-
tive and gives him an out. If a graceful exit is what
the healthcare organization leader was looking for, a
follow-up meeting is likely to be a waste of time anyway.
Another CEO automatically brings another manager with
her into her “ten-minute meetings” so when she leaves,
the follow-up person is already engaged. If you request a
ten-minute meeting, you might suggest the senior execu-
tive include someone else who can serve as the future
contact point if they are interested. During the meeting,
you can ask the senior executive if and how they would
like to remain involved.
◾ Become a recognized and valued member of the local
healthcare community. Get involved with pertinent
professional organizations – like Health Information
Management Systems Society (HIMSS), the American
College of Healthcare Executives (ACHE), Healthcare
Financial Management Association (HFMA), or other
relevant group – by serving on committees and boards.
It’s a great way to get to know key leaders in your mar-
ket and to become a known, helpful, and trusted entity.
If you cover a wide territory, it’s impossible to be person-
ally invested in dozens of markets across the country. No
one expects you to be 100% vested in a dozen different
geographic markets, but you can be involved to the extent
possible in your own city. If you are personally contribut-
ing to local groups’ efforts, your reputation will precede
you. Your goal should be that whenever your name comes
up, people nod their heads and say, “Yeah, he’s a great
guy.” Despite its national presence, the healthcare world is
amazingly small. You want your strong reputation to go

out in front of you.
Also, if your organization operates out of various loca-
tions, another strategy is to encourage your local reps to
engage to the extent possible. This will greatly enhance
your corporate image.
◾ Pursue your company’s “offcial” recognition status from
a state hospital association or other respected group.
Those organizations have formal vetting processes, and
being designated a preferred vendor may lead to some
degree of preferential consideration. It can be a differ-
entiator, and it may encourage your target to take your
call, but don’t expect this designation to cause doors to
fy open before you.
◾ Seek other ways to connect with senior leaders. Perhaps
they serve on the local Chamber of Commerce or par-
ticipate in Kiwanis or some other service organizations.
Also, check out LinkedIn or other social media platforms.
If you see a common connection with a colleague you
know well, you can reach out to them to see if they would
be comfortable making a professional introduction. You
might even be able to relate to a common “off-line” activ-
ity. I mention under the “Personal Interests” part of my
resume the fact that I am a professional blues harmonica
player. Someone in Chicago who saw my resume reached
out to me one time and told me to think about taking a
job in his city because of the great blues scene there. The
blues harp reference proved to be a good conversation
starter.
◾ Try to have a reason why a senior executive should pay
attention to you. One of the benefts that Georgia Hospital
Association’s (GHA) vendor partners receive when they are
endorsed by the association is the opportunity to occa-
sionally send out promotional material through the GHA
publications. When I led that area, I found that some ven-
dors would want to send out the same tired material time
after time. I admonished them to come up with something

new: a new product launch, an updated version of their
software, a major study they just released, or anything else
to grab the hospitals’ attention. Manufacturers of toilet-
ries and other consumer goods recognize the need to offer
something new to the point that they will sometimes even
announce in bold letters, “New Packaging.” One detergent
manufacturer recently went so far as to slap a sticker on
its bottle bragging about the “New Look, Coming Soon.”
Even though neither the detergent nor the packaging had
changed, they were trumpeting their plan to change some-
thing. I’m not sure I care about that at all, but this tactic
shows that the advertising world sees the value of putting
something new out there.
◾ Consider whether you are violating the “I hope you’re
doing well” principle. I don’t know that this opening line is
universally frowned upon, but there may be enough people
who dislike it that you should consider whether or not it’s a
good ft for you.
◾ When it comes to email communication, what’s in
the “From” box often determines whether or not the
recipient opens it. People always read emails from
others who are important in their world. There’s nothing
you can do if you don’t happen to be in that inner circle.
However, recognize that the second most important lever
for getting an email read is the subject line. I maintain
two different blogs, and I spend almost as much emo-
tional energy writing my subject line as I do in selecting
my topic in the frst place. I can’t tell you how many
blogs I get with some variation of “This Week’s Blog.”
Unless you are the Queen of England, someone of equal
stature, or the most brilliant person in my feld, I’m pretty
unlikely to stop what I’m doing to read an email entitled
“This Week’s Blog.” Tell me what it’s about. Lure me in
with an intriguing title. Arouse my curiosity. “This Week’s
Blog” doesn’t do it.
◾ Similarly, you must keep your email communication as

crisp and brief as possible. One CEO friend commented that
she gets tired of reading very long emails to fnd the relevant
points, and (as she put it) “an ‘apology for the length of the
email’ in the subject line or introductory line is a dead give-
away” that it will require a lot of effort to read.
◾ Because of the “cluttered inbox syndrome,” some people
are revisiting the “old school” concept of writing personal
letters. This can be more cumbersome and expensive than
sending an email, but a carefully crafted personalized
letter – not a sales pitch form letter – can help you get your
prospect’s attention.
34. Failing to Do the Research on Your

Competitors’ Products to the Point Where
You Can Credibly Show the Superiority
of Your Product
I may be one of the few people on the planet who enjoys buy-
ing a new car. We tend to drive our vehicles into the ground,
so I only get to enjoy my hobby every eight or ten years. Part
of the fun is researching the available models to fnd just the
perfect blend of style, performance, and value. When I go into
a dealership, I am pretty familiar with their offerings and most
of my preferred vehicle’s features. Nevertheless, I do have a few
questions about some of the fner details.
About eight years ago when I was on one of my car-buying
expeditions, I went to test-drive one of the cars I was strongly
considering. The sales guy was friendly, but I was surprised
that he couldn’t answer some pretty basic questions. Although
I didn’t necessarily expect him to have memorized how many
square feet the trunk had, in the course of the conversation, I
quickly realized that he had only a passing acquaintance with
the cars he was selling. I mean, isn’t that his job?
I thought, “How can I as a potential customer know far

more than the salesman about what he is selling?” When I
walked into the dealership, there wasn’t another customer in
sight, and he was sitting at his desk drinking coffee and read-
ing Sports Illustrated. Why wasn’t he brushing up on all the
details of his cars and those of his competitors?
This principle carries over into healthcare. Anyone in a
sales role should be thoroughly informed about their prod-
ucts and also know enough about competitors’ offerings to
show how their own product is superior to their competitor’s.
Unfortunately, during my 24 years of meeting with vendors,
I found a surprising number who didn’t know their offerings
as well as they should have.
Recommendation:
◾ If you’re a vendor, you should know your products inside-
out and also be prepared to discuss what your competitors
offer. Just be careful not to exaggerate your superiority
or bad-mouth the competition. Your potential custom-
ers expect you to be professional and positive about your
products, but be careful to not undercut your credibility by
overstating your advantages or understating those of your
competitors. This could come back to haunt you.
35. Focusing on “Features” Rather Than

on How Your Product Solves a Customer’s
Problems
This is as basic as it comes. Sales professionals are constantly
reminded to demonstrate how their product solves a problem
they know the potential customer has. Of course, the customer
wants to see that your software screens are attractive and easy-
to-read, but what they really want to know is that you can help
them address whatever pressing need they are facing.
One rural hospital CEO recently told me of an unpleasant

encounter he had with a signage company salesperson who
took a “features” approach. Rather than investigate his hos-
pital or even the healthcare feld in general, he showed up,
talked about how great his company was, and presented a
boiler-plate proposal that included nothing specifc about his
hospital. Instead, he should have researched this CEO’s institu-
tion, explained his prior experience with similar organizations,
asked some relevant questions, offered a tailored proposal,
and then asked him how he could refne the proposal to
even better match the hospital’s needs. The vendor’s message
should have been, “I’ve worked with a number of other rural
hospitals, and based on my experience and after hearing what
your needs are, I think this approach will give you what you
want. Here are my initial thoughts about the look and feel
your new signs should carry. Does that seem on track to you?
How can we make it even better?” This type of discussion
would have made all the difference to the CEO.
Recommendations:
◾ It’s natural to tout your product’s superiority, but don’t
forget that, instead of stressing what your product is, you
should stress what it does and what problem it solves.
◾ Don’t forget to ask a lot of questions to make sure you
really grasp the issue and can provide an appropriately
targeted proposal.
36. Having an Inadequate Web Page That

Fails to Let Potential Clients Understand
What You Really Do
Nowadays your website is your front door. The frst place most
people go when they hear about a particular company is their
website. Most are quite good, but some that I see could stand
improvement.
Disclaimer: Although I have extensive communications

experience, I am not a communications consultant or a social
media expert. Nevertheless, here are some of my observations.
The websites of early-on companies tend to fall into one of
three categories:
1. They provide a solid overview of the company and what

they do – This is what you want.
2. They look very impressive, but on further examination,
it turns out there is less to the company than the web-
site implies – In my opinion, this is not bad. You want
to project as professional and “big” an image as possible.
As long as you don’t cross the line of misrepresentation,
putting your best foot forward is fine.
3. They fail to communicate the basics of what the company
is really about – When I visit a website, I want to know
what the company does, who the leaders are, and how to
get in touch with the company. Some sites don’t provide
this. There can be two reasons:
– The company is still a bit squishy and hasn’t com-
pletely formulated what it does
– The leadership is trying to guard their proprietary
information and is reluctant to share too much
I will address these two issues in the rest of my
comments about this pitfall.
I believe most healthcare people are sympathetic toward

and supportive of innovative entrepreneurs. They recognize
their potential to upset the apple cart in a good way and
understand that start-ups are start-ups.
If you engage in a serious discussion with a physician or
executive, they will quickly be able to figure out that you’re
a small, early-stage company, but that is not necessarily the
kiss of death. Despite what I mentioned in Pitfall 2 about
some organizations ultimately declining to work with an
untested company, you shouldn’t let that possibility inhibit
your preliminary conversations with them. You are who you

are, and you can sometimes muscle through an organization’s
reluctance to work with smaller companies. And depending
on what you offer, you will fnd some healthcare organizations
actually prefer to work with a smaller company to get more
personalized attention.
The issue of protecting your intellectual property is a bit
more complex. A longtime friend who is a former hospital
CEO-turned-consultant recently mentioned an unforeseen
problem created by inadequate web pages. He was asked by
a friend to become an adviser for a new tech-related product.
The technology they are using has been around for many
years and is already widely used. The entrepreneur claims on
his website that his approach is far better than the existing
one but offers no details or evidence.
Wanting to be helpful and so he could provide a meaning-
ful critique, my friend agreed to meet with the product’s man-
ufacturer and dig into the details. The manufacturer, though,
presented him with a very restrictive, ten-page Non-Disclosure
Agreement (NDA) with a ten-year shelf life. Here’s my friend’s
evaluation:
After reading it, I’ve concluded that most sales tar-

gets will have to sign a similar NDA just to engage
in a discussion that differentiates it from older solu-
tions. I think the lack of pertinent information on
the website combined with an overly ambitious NDA
is a potential “non-starter.” If the solution is that
good and the “secret sauce” so secret, it should be
protected with patents, or be patent pending, in my
opinion. If they can’t get a patent, then I ask if the
solution really all that different.
He also pointed out that many healthcare organization

boards are very reluctant to allow anyone in the organization
to assume the kind of legal liability typical in most NDAs. His
comments parallel my remarks under Pitfall 18 about the dan-

gers of overly restrictive NDAs and their impact on potential
advisors.
Recommendations:
◾ Review your website to make sure you adequately com-
municate the basics of who you are, what you do, and
how to reach you. One of my pet peeves is a web page that
doesn’t list the organization’s physical address and phone
number. There have been times I am on the way to visit
with a local company and I need the street address for my
GPS. Similarly, there are times I have a very basic ques-
tion that could be answered by a simple phone call. But I
can’t fnd their contact information anywhere. I recognize
the value of having inquirers complete a form to submit
their contact information to you, but that means a delay
in them being able to talk to you. You should make it as
easy as possible for potential clients to reach you on their
timetable, not yours.
As long as we’re on the topic of phone calls, let me also
express my frustration over people not including their cell
number in their email signature lines. More than once,
I have been on my way to a local meeting when Atlanta
traffc unexpectedly kicks in and I have to let the person
I’m meeting with know an accident has slowed me down.
I may not have them in my smartphone contacts yet, and
when I fnd their email, it turns out they haven’t included
their mobile number in their signature line. You should
make it as easy as possible for people to reach you!
◾ Even if you are still in your developmental stages, try to be
as detailed and specifc as you can be on your website.
◾ Consider the possible interaction between the level of detail
on your website and the need for restrictiveness in your
NDA. Don’t be so vague on your web page and so overly
protective of your product that you back potential clients
into an NDA corner.
37. Cluttering Your Presentation and Marketing

Material with So Many Product Features, Some
of Which Are Not That Important, That Your
True Differentiators Get Buried
Vendors are understandably excited about their products
and sometimes stress the “glitzier” aspects of the software.
Although the fashing lights and pretty colors may be fun,
focusing too much on them may cause the potential client
to lose sight of what the product actually does and why they
should care.
Many of the vendors who visited me at GHA would come
in with great-looking brochures touting all the features of their
products. This isn’t a real example, but some of their lists
would include things like this:
◾ Has state-of-the-art graphics

◾ Is user-friendly
◾ Is Software as a Service (SaaS)-delivered
◾ Features cloud-based storage
◾ Is the only product with database X, a proprietary
resource developed by former U.S. Department of Health
and Human Services (HHS) employees
◾ Is offered by a company with a seven-year track record
◾ Was selected as top software product in its class
◾ Is customizable
◾ Allows comparisons with other facilities
First of all, these are features and don’t explain how the prod-
uct will help me. (Refer to Pitfall 35.) They are all wonderful
features, but every other vendor in the marketplace can say
many of the same things. After all, how many software prod-
ucts are not SaaS-delivered, cloud-based, and customizable?
The last bullet about facilitating comparisons among facilities
shows what the software does and is very important. The
two other items on the list that really stand out to me are its
proprietary database developed by credible people and the

fact that it was selected as top in its class. These three items
should be shouted from the housetops. Unfortunately, the
jumbled approach that mixes in less relevant information is far
more common than you would expect.
Recommendation:
◾ Lead with the two or three product capabilities (i.e., what
only you can do for the client) or features that truly differ-
entiate you from the others, especially if you are operating
in a commoditized market. Give your prospect a reason to
buy your product instead of someone else’s. After you have
clearly made your pitch for how your product can help
them like no one else’s, you can list, in almost a matter-of-
fact way, some other capabilities or features that are good
but not game-changers. You want them to walk away with
a clear understanding of the two or three reasons why you
can help them better than anyone else can.
38. Failing to “Layer” Your Message and Tailor

It to Various Audiences
No one understands your product better than you do, espe-
cially if you are an entrepreneur who spent months or even
years turning your brainchild into a product. One of my frst
clients was a very talented lady who had spent 15 years as a
data analyst with a large healthcare company. Her experience
led her to a novel way to analyze data for a particular out-
patient area, so she quit her job and spent about six months
developing her product. I immediately saw the value and
was pleased to be able to jump in to help her with her mar-
ket strategy. I rarely accompany my clients on sales calls, but
because I thought her approach was so good, I agreed to help
her fnd a hospital beta test site.
She obviously knew every nuance of her product and was

very enthusiastic about what it could do. Her problem was that
she was so familiar with it that she felt compelled to explain
every single detail about every decision tree branch in the
software. As a result, potential beta site executives glazed over
within about ten minutes and got lost in the minutia. She also
failed to recognize that clinicians would care about certain
aspects of her approach, executives would focus in on oth-
ers, and IT people would want to discuss yet a third area. She
completely missed this point and got into the IT weeds with
the hospital CEO.
At the beginning of the meetings with potential beta
users, I provided a two-minute intro including why we were
there and a very high-level discussion of what her product
did. I then turned it over to her. And, despite my repeated
prior advice, she proceeded to over-explain absolutely every-
thing and get into programming-type explanations that had
little to do with patient care or anything else the CEO cared
about.
Recommendations:
◾ As with the previous pitfall about cluttering your explana-
tions with too many features, it’s important to focus on
the problem your product solves and two or three main
reasons potential customers should use your product. This
is the primary point you should reinforce several times,
perhaps wording it slightly differently each time. Media
relations experts advise their clients to decide in advance
of a TV interview what message they want to get across to
the public and then keep coming back to it several times
in the course of an interview. If you watch politicians, you
often see them not really answering the question they are
asked but using it as a springboard to get their predefned
message out. I’m not suggesting you act deceptively, but
you should steer the discussion toward your main points to
the extent possible.
◾ Think layers. Start with a very brief product overview (i.e.,

the “elevator pitch”). Then feature your product’s unique
capabilities and how it will address their issues. Follow
that with a high-level product description, and then
fnally dive into whichever area of detail they are most
interested in.
◾ Tailor your presentation to your audience. Clinicians are
not likely to care about the technical challenges you had
to overcome in combining databases. However, the IT
staff might. Of course, your overarching message – that
is, what problem you are solving – will still be the same,
but your focus will vary depending on your audience.
◾ If you are presenting to a group that includes clinicians,
executives, and technical people and you start getting
bogged down in technical minutia, you can suggest a
separate meeting with the tech people to answer their
questions to their satisfaction.
39. Being So Concerned to Not Oversell

Your Product That You Undersell It
I have a theory that people tend to listen to the wrong advice.
Let me explain. I am wary of “hard sell” approaches and have
seen that most healthcare executives and clinicians are as well.
Neither they nor I tend to respond well when we start feeling
like we’re being “sold to.”
As a result, I routinely advise my clients to avoid oversim-
plifcation and high pressure techniques.
Apparently, I’m fairly convincing because one of my clients
took my “soft sell” advice to the nth degree and ended up
underselling and almost de-marketing her product. I happened
to sit in on one of her presentations and saw that she was so
worried that she would come across as pushy that she quali-
fed every statement to the point that I began to wonder if she
even believed in her product herself. Her natural desire for

credibility and absolute accuracy led her to overdo the caveats
and appear wishy-washy about what she did. In this case, she
should have thought through how her personality ft in with
my “generic advice” about not being pushy and not taking it to
the extreme she did.
Recommendations:
◾ Keep in mind the resistance most executives and clinicians
have to hard-sell techniques. Pitches that include “this offer
expires on ____” seldom succeed with them.
◾ As you develop your presentation materials, factor in your
demeanor and natural inclinations and don’t swing too
far the other way. Your goal is to come across as respectful,
enthusiastic, and confdent, but not brash.
40. Presenting a Totally Unfocused Message

Companies, of course, want to cast a wide net to try to reach
as many potential clients as possible. Sometimes in that pro-
cess, though, they end up presenting themselves as being able
to do so many things that they totally confuse potential clients
who can’t quite fgure out what they actually do.
A few months ago, I was talking to an Austin-based poten-
tial client of mine whose website included dozens of seemingly
unrelated healthcare services: facilities management, compli-
ance with human resources regulations, the Health Insurance
Portability and Accountability Act (HIPAA) services, nurse
education, and several other topics. Each major category had
numerous sub-bullets elaborating on their offerings. The ven-
dor’s physical brochure was an 11” × 17” sheet folded in half
and was flled with close to 50 separate products and services.
Beyond being cluttered and confusing because of the
dozens of things they offered, it was a mess visually – very
dense text with few headlines to separate the material. My

rule of thumb is that I should be able to hold the docu-
ment about fve feet away and, based on how it is laid out,
see the major sections. This helps guide the reader through
the material. This particular brochure was a pretty solid
mass of gray.
The combination of their online description and their bro-
chure was such a jumble of unrelated items that left me with
two impressions:
1. I really don’t understand what this company’s core busi-

ness is.
2. If they really do cover all these things, they must have hun-
dreds on their staff to be able to competently offer so much.
As I poked around further, I discovered that the company is

actually very small – only fve employees. But they had loose
affliations and contractual relationships with many other orga-
nizations, which allowed them to legitimately claim a broad
range of services. As a small consulting company myself, I
understand the value in partnerships to supplement the cen-
tral services my company can provide, but this particular
company was little more than a contracting shell with not a
whole lot at its heart.
Once I fnally got to the bottom of what they actually did,
I was not impressed. Their basic competency was actually fairly
limited, and I wasn’t sure I could really trust them because I
felt they were bordering on misrepresentation by trying to proj-
ect the image of a huge multi-faceted organization.
Recommendation:
◾ Present your company in as positive a way as possible, but
don’t clutter your message to the point that potential clients
are thoroughly confused by your real offerings or ques-
tion your integrity. Reverse the roles. How would you feel
if you found out that a potential business partner hid the
fact that, rather than having a strong in-house staff team,

they outsourced 95% of what they claimed to do and were
not particularly transparent about that?
41. Being Unable to “Break Through” and

Convince the Healthcare Organization It Truly
Needs Your Product
Every entrepreneur’s dream scenario is securing a meeting
with a senior healthcare organization executive, presenting
their product, and having the executive place an order on the
spot. I’m sure this happens, but only as often as the Chicago
Cubs win the World Series.
A more likely version is either that the vendor gets a
ho-hum response or that the executives does have some inter-
est but then must engage others in the healthcare organiza-
tion, thus ushering you into a black hole. Buying something in
a hospital is typically a team sport where multiple individuals
and departments have to suit up.
Whether it’s the person who is directly over the area most
likely to use your product or someone else on the “extended
team,” one of the hardest sells is someone who fails to see
why they need your product. There can be three reasons for
their resistance:
1. Maybe your product really doesn’t ft, either because that

particular healthcare organization is not the right target
or because there is an underlying design faw. Of course,
not every organization will be a good match for every
product. If that’s the case, you can use the meeting as a
learning opportunity for future presentations. Ideally, the
problem should not be a basic design faw. If you fol-
lowed the advice given in Pitfalls 18 and 19, you should
have gotten adequate real-life input so that you designed
your product to truly meet real needs.
Recommendation: If you suspect your product is def-

cient, respectfully ask for candid feedback and ask what it
would take to make your product saleable. You may need
to go back to the drawing board and tweak your product.
It may not require a wholesale makeover. Perhaps just
adding one element, data source or capability is all that’s
required.
2. Maybe the roadblock individual lacks vision and is a
“heads-down, I just want to do my job”-type person. This
is a tough one. One executive who has served as interim
and full-time CFO and interim CEO at numerous hospitals
is a fun-loving, no-nonsense guy who seldom minces his
words. However, he tells the story about how he learned
to persuade people in a very gentle way. He literally
spent one of his college summers as the proverbial door-
to-door vacuum cleaner salesman. Think about his chal-
lenge. If he got in the door in the frst place – which in
and of itself is a huge accomplishment – he had to con-
vince the lady of the house that she needed his product
without insulting her. If she thinks her current vacuum is
doing the job, why does she need his? But if he implies
her house is flthy, he’s out the door.
Recommendation: Your goal is to get the “heads-
down” person to lift their head up long enough to see
that your product may be able to help them to accom-
plish their goals, but not in such a way that you imply
they’re not performing adequately. Your task is made
easier if you can legitimately explain you are applying
a new approach to their operational area. The lady con-
sidering buying a new vacuum cleaner won’t think you’re
calling her a slob if you have the frst turbo-charged,
supersonic machine with three times the suction of con-
ventional cleaners. Similarly, if your product introduces
a new technology or approach, that provides a natural
explanation for why the facility is still doing things the
old way.
3. Maybe you have not adequately tied your product to

a strategically important initiative for the healthcare
organization.
Recommendation: As I mentioned in Pitfalls 35 and 37,
you should always focus on how your product solves the
organization’s problems and the two or three capabilities
that truly differentiate your product from others. Reinforce
how it addresses a strategically important priority. Your
sales target may think you are offering a commodity and,
therefore, fail to see why it might be worth making the
switch from their current approach. This can be especially
true for the “heads-down” person.
42. Including Your Pricing on Your Website

or in Written Material
Sales executives who believe their products are quite attrac-
tive sometimes try to make the purchasing process as simple
as possible by providing in their publicly facing material
full details of their product, including pricing. This is almost
always a bad idea unless you are offering a straightforward,
completely commoditized product and your sales appeal is
almost strictly your pricing.
One vendor I met at a conference had a very nice but
somewhat unusual software product that tracked supervi-
sors’ comments about their employee and other HR functions
I hadn’t seen elsewhere. The problem was that it takes about
ten minutes to fully explain his software. His website included
a fairly thorough description of the product, including details
of the four variations available. It also had pricing for each of
the options. He may have been inspired by the chart on the
back of some tax preparation software boxes that includes a
checklist of what each version (standard, deluxe, professional,
etc.) includes, but his product had several unique, potentially
confusing features that would not be obvious to uninitiated
users. After he explained his product to me in full detail,

I was able to understand most of the variations, but I knew
that someone who stumbled onto his web page would prob-
ably miss most of the details.
If you have an elaborate or potentially confusing offer-
ing, your goal is to engage potential clients in a conversation
so you can assess their level of understanding and correct
any misconceptions they may have. They probably don’t
fully appreciate the value of your product, and listing prices
removes one of the reasons they may have to contact you.
I, myself, made the mistake of publishing prices when I frst
launched my consulting business. I had developed an offering
called the Healthcare Marketing Tune-Up Program with three
elements:
1. A review of the company’s products in light of the “7 Ps

of Marketing”
– Product
– Place (distribution methods)
– Positioning
– Promotion
– Packaging
– Price
– People
2. Suggestions for avoiding the relevant pitfalls I had identi-
fed. These pitfalls are what eventually made it into this
book
3. A summary Strengths/Weaknesses/Opportunities/Threats
analysis
My objective was to offer a clearly defned “product” that

potential clients could easily understand. With thousands of
start-ups, I thought a straightforward description of my offer-
ing, including its affordable price, would essentially “sell itself.”
I was wrong. Even though my description was quite complete
and there were few comparable products, I found it necessary
to discuss what I do in some detail for potential clients to be

able to understand it. Very few people “got it” from just the
written description. I had to engage them in a fairly detailed
conversation.
Publishing my prices undermined the goal of engagement.
Potential customers had no reason to reach out unless they
took the initiative to seek answers to their question or wanted
to engage me. I should have set up a dynamic where website
visitors would have had a reason to reach out to me if they
were interested. By listing the price up front, I had taken away
an important reason for them to connect with me.
Recommendation:
◾ Think long and hard before you publicly advertise your
pricing. As stated above, if yours is essentially a commod-
ity offering, your primary appeal could be your pricing.
If this is not the case, though, readily displaying your
prices is likely to undercut the opportunity for personal
interaction.
43. Positioning Your Approach to “Sell What

You Have” Instead of Identifying Their Problems
and Solving Them
Many sales and business consultants constantly beat this
drum, and with good reason. People don’t really care about
your slick product features. They want you to solve one of
their problems. (See Pitfall 35.)
Several years ago, I was at the wrong end of a clunky
attempt to get me to buy someone’s product instead of get-
ting my problems solved. As I explained under Pitfall 34,
I love buying new cars. It’s great fun to research various
models and then get to road-test the top contenders. I had
my eye on one manufacturer’s small SUV, so my wife and I

visited the local dealership to check it out. I explained to the
salesman why a small SUV would be a great ft for our needs
at that time.
Although I liked the exterior styling, as soon as we sat in
the vehicle, I immediately knew it wasn’t right for us, and I
told the salesman so. There was no reason to waste either his
time or ours.
But in good “buy what I have and not what you need”
fashion, he asked. “Can I interest you in this full-size sedan?”
“Seriously,” I thought. “Didn’t he hear me explain I wanted
a small SUV that would accommodate landscaping plants and
building supplies? How does his full-size sedan even come
close to ftting that bill? Never mind I had also mentioned that
driving a somewhat stylish vehicle is important to me, and one
of the car magazines described this particular sedan as being
so frumpy that it looked like a refugee from a 1960s-era Soviet
gulag.” But rather than verbalize any of these details, I politely
told him I didn’t think his for-grandmothers-only vehicle
would be a good ft. In one sense, this car salesman had noth-
ing to lose in offering me a lousy alternative, but he did noth-
ing to make me want to ever go back to his dealership.
Recommendation:
◾ Don’t default to ticking off all the wonderful features
of the product you happen to have instead of assessing
the organization’s need and determining how well it
might solve their problems. If you plan to have continu-
ing contact with these folks, you don’t want to develop a
reputation for pushing your junk rather than becoming a
strategically important resource. Also keep in mind that,
as I have said before, the healthcare world is surpris-
ingly small, and people from different institutions and
sectors freely talk with each other. Avoid sullying your
reputation.
44. Not Doing Your Homework to Learn about

a Potential Client’s Situation and Looking
Foolish as a Result
One of my friends – I’ll call him Chris – is a senior operations
executive at a Kansas health system in the process of merging
with another system. This merger has been in the works for a
couple of years and everyone knows about it. It has also been
widely reported that Chris’ system will be transitioning from
Electronic Health Record (EHR) vendor A to EHR vendor B (the
one used by the other system), so his EHR vendor will be out the
door in a matter of months. Nevertheless, Chris has received sev-
eral calls from consultants wanting to help him “enhance” his use
of his original EHR. If they had any level of ambition, they would
have known that Chris’ system would no longer be using that
particular EHR. They are obviously trying to sell what they have
rather than address the client’s real need. How much credibility do
you think they have when they haven’t even bothered to research
what product Chris’ system will be using in the future and instead
offer something they should have known is totally irrelevant?
Recommendations:
◾ In order to position yourself as a trusted industry asset, do
your best to determine in advance your potential client’s real
need and show how your approach addresses those needs.
◾ Once you get in front of the client, ask a lot of questions.
One senior leader stated, “A great way to get at the specif-
ics of the problems the customer has (and that the product
might solve) is to ask a bunch of questions. It shows I genu-
inely care about what issues you are facing and need to
better understand before I go blindly into a speech talking
about my product and why you would be a fool not to buy
it. In asking the questions, it will help the rep focus the dis-
cussion on the product’s benefts aimed directly at the issues
or problems the customer themselves have verbalized.”
Chapter 12
Return on Investment
Pitfalls
Although quality and patient care top the priority list for
healthcare providers, neither of these is possible without ade-
quate funding. Back in the 1980s, Sister Irene Kraus, the frst
president of the Daughters of Charity National Health System,
caused quite a stir within the healthcare world by coining the
phrase, “No margin, no mission.” This catchphrase – surpris-
ing coming from a religious leader – explains how the mission
side of caregiving is only possible when the fnancial under-
pinnings are in place.
Return on Investment (ROI) pitfalls are among the most
common and potentially damaging ones I see. Although
vendors understand the importance of making a good fnan-
cial case for their product, they sometimes fail to grasp the
complexity of how healthcare services are funded and end up
slapping together a haphazard ROI case with more holes in it
than a target at the conclusion of a Summer Olympics archery
competition.
191
⭆ 45. Thinking a Healthcare Organization

Top 10
Will Embrace Your Product or Service
Even If You Don’t Have a Clear,
Demonstrable ROI
Pursuing medicine is one of the highest callings there is.
Physicians and other providers devote many years to prepara-
tion, often at great personal cost. Medical school and residency
program demands and schedules border on the inhumane as
students and interns regularly work around the clock. The toll
on personal health and marriages can be great. Of course,
for many medical specialties, the long-term fnancial reward
is part of the payoff at the end of the long tunnel. However,
with healthcare’s changing fnancial dynamics over the last
30 years, becoming a physician is often not considered as
attractive as it once was.
Back in the mid-1980s when I was doing my two-year
administrative fellowship at Michigan Medicine, I had the
chance to spend an entire year working within the School
of Medicine. It was a wonderful, formative experience that
enlightened me about the physician’s mindset. Medicare’s new
payment system based on Diagnosis-Related Groups (DRGs)
was just rolling out, and I recall the many internal discussions
we as the health system had about how to adjust to the new
payment approach.
Many physicians were almost incensed that fnances would
even come up when discussing how care should be delivered.
“Old school” clinicians take pride in their primary commit-
ment being to the patient’s welfare. One physician in particular
boasted that he purposely avoided knowing the insurance sta-
tus of his patients. To him, it didn’t matter whether the patient
was covered by commercial insurance, Medicare, or Medicaid
or didn’t have insurance at all. Providing the needed care
regardless of the fnances was paramount for him.
This admirable attitude still persists to a large extent, but
fnancial realities of the last three decades have forced more
Return on Investment Pitfalls ◾ 193
discussion about fscal considerations into care delivery

conversations.
One of my recent consulting clients was a physician who
had an attractive technology-based approach within her medical
specialty, which is not one of the “major” areas like cardiology
or orthopedics. Unfortunately, she wasn’t getting much traction,
and she commented to me, “I thought the clinical value of what
my approach brings would convince people to move forward.”
That’s a nice thought, but in today’s tough fnancial climate,
there are too many other factors at work. As we discussed in
Chapter 1, most hospitals lose money on substantial parts of
their inpatient volume, so they have to fll the hole somehow.
This makes it very diffcult to justify expenditures with no
demonstrated ROI.
I recently heard about a rural hospital administrator in the
upper Midwest who experienced fairly signifcant pushback
from his staff over his decision to purchase paintings from
local artists to spruce up his somewhat dowdy, 250-bed 1950s-
era hospital. He spent about $12,000 buying artwork for some
of the public areas and saw it as a win-win: the hospital would
be made more attractive, and this purchase would also com-
municate the hospital’s support of the local arts community.
The nurses didn’t see it that way. They hadn’t received a sal-
ary increase in several years and let their displeasure be known.
In reality, the $12,000 the hospital spent on artwork would
make very little tangible difference in nurses’ take-home pay
long-term. By the time you spread that relatively small amount
over the entire nursing staff salary structure, the ongoing impact
would hardly register. But his decision still created confict.
Every dollar available is being pulled in many different
directions: staff salary increases, updating OR equipment to
support the medical staff, physical plant improvements, IT
infrastructure upgrades, etc.
So, unfortunately, clinical value in and of itself is not
enough to carry the day. Someone, somewhere along the
decision-making process will eventually ask the hard fnancial
questions, and without solid ROI numbers, most projects will

die an untimely death. So, a credible ROI projection is crucial.
Recommendation:
◾ Read the rest of this chapter to learn the “ins and outs” of
developing believable ROI numbers.
The following three pitfalls describe a very common fallacy

committed by vendors: presenting overly rosy or simplistic
ROI numbers.
During the 19 years I was GHA’s primary gatekeeper for
vendors seeking the association’s endorsement for promo-
tional purposes, I heard just about every vendor approach
imaginable. I would say the biggest mistake I consistently saw
was vendors presenting sloppy, non-credible ROI numbers. I
call those, “ROI projections only your mother would believe.”
Let me use the following example to explain the three
most common ROI fallacies I saw.
⭆ 46. ROI Fallacy 1 – Not Realizing How

Top 10
Diffcult It Is to Actually Capture
Potential Savings
Vendors often claim their product will pay for itself, or at least
save enough money to make a big dent in the price tag. They
typically point to some kind of savings projection as a justif-
cation for that statement.
A couple of years ago, I met with a vendor who asserted that
his product could speed up a particular department’s through-
put, thereby increasing effciency. The product was fairly expen-
sive, but he promised a fve-month ROI. In light of the price tag,
I found that a bit hard to believe. “You’re on,” I said. (I’m chang-
ing the facts of his product, but let me walk through his logic.)
“Our product can save a physical therapist (PT) fve min-
utes per procedure, and the average PT sees 15 patients a day.
So that saves 75 minutes per eight-hour shift.” He did the math

assuming fulltime PT’s salary and benefts at $90,000 to get to
his fve-month breakeven.
What’s wrong with this picture? His math works but his
logic doesn’t. Assuming his product did truly save fve minutes
per procedure, could the healthcare organization really
capture those savings? In other words, he was asserting a
reduced workload – and by implication reduced costs – of
75 minutes per day (5 minutes per procedure times 15 pro-
cedures). He then declared you could apply the savings to
pay for his product. But since the PT isn’t going home after
6 hours and 45 minutes, they are still on the clock and getting
paid, and you can’t write a check from the reduced minutes.
After I explained to my vendor friend that capturing sav-
ings would be tough, he said, “Well, maybe, but the PT can
do other things that are really important that they haven’t had
time to do.” True, formerly undone tasks may get done, but
they are still getting paid, so there is no salary reduction.
Depending on the nature of the job function, and assuming
there are many employees with the same repetitive job func-
tion, this logic does have some merit. For example, if you have
six Full-Time Equivalents (FTEs) in the same job function and you
can eliminate 75 minutes per day for each of them, that translates
to 450 minutes or 7.5 hours per day. Now you’re talking.
A technology that reduces a few minutes for a billing clerk is
likely to be more promising than one that saves time for nurses.
Billing staff have one primary task, and larger healthcare orga-
nizations typically have enough billing clerks that a streamlined
process could potentially eliminate part of a position. On the
other hand, nurses conduct many different functions during
their shifts, so it is unlikely they do the same activity enough to
aggregate enough “saved” minutes to cut staffng.
Another location where a time-saving technology could
potentially save some money is a smaller physician practice
that employs a relatively small number of support staff or
lower acuity clinical staff. Since each employee typically wears
many hats and task time demands often vary by day of the
week or season, the tight staffng level sometimes results in
overtime. If your product truly saves time, you can legitimately
make the case that some of the acquisition cost would be off-
set by avoided overtime expenses.
But overall, the very common claim that a product will
save a few minutes per procedure and “pay for itself” is wildly
optimistic. Actually reducing hard operating dollar outlay for
labor-saving programs can be diffcult.
What’s required to avoid ROI Fallacy 1:
◾ A technology that introduces effciency for positions with

high volume of a single activity and fairly steady demand
throughout the work shift
◾ Enough employees in the affected job category to “gather”
the savings to the point where headcount can be reduced
or repositioned
◾ A situation where a healthcare organization department
or physician’s offce routinely incurs overtime expenses
and the new technology can save enough time to make
some of that overtime unnecessary
Recommendation:
– Be very careful about how you describe potential cost
savings. I have heard over and over from my healthcare
colleagues that they are extremely suspicious of claims
that “this product will pay for itself.” They’ve heard that
song more than once and have almost always been
disappointed.
47. ROI Fallacy 2 – Claiming That Using Your

Product Will Allow the Provider to Bring
in More Revenue
Even though I shot holes in the salesman’s logic about saving time
for physical therapists as described in ROI Fallacy 1, he wasn’t
deterred. “Well, even you don’t send the therapist home early,
reducing the time per procedure ends up increasing the therapist’s

capacity so he can see more patients and bring in new revenue.”
Nice thought – if capacity constraints are literally forcing
the facility to turn patients away. That may hold true for some
clinical areas, but it’s certainly not true across all healthcare
delivery sites. Depending on the service line, some providers
may be idle for parts of their days due to low patient volume.
So, increased effciency doesn’t necessarily translate to bring-
ing in new patients. Consequently, the “promised” incremental
revenue won’t materialize.
There is a further complication to the “increased through-
put” argument. There may be bottlenecks involving other
staff who are part of a clinical or operational process and
who would not be helped by the new technology. A good
example relates to operating room scheduling. Even if a
new technology saves a few minutes per procedure for the
surgeon, those saved minutes evaporate if housekeeping is
understaffed and can’t turn the room over quickly enough
to slip in an additional procedure. So, capturing the “saved”
minutes and scheduling extra procedures won’t happen.
One of my clients gave me a great example of one sales-
person who stumbled over both ROI Fallacy 1 and ROI
Fallacy 2. He told me about the time he was with a previous
company when he went head-to-head with another vendor in
an EHR bid. The other vendor stressed their quicker response
time – a full ½ second per click. He used that ½-second sav-
ings to make the following economic argument:
½ second saved per click times

On average 40 clicks per visit times
On average 40 visits per day yields
About 13 minutes per day
He claimed this allows for:
1 extra patient visit per day which generates
On average $85 per visit times
150 days per year which yields

$12,750 per year
“So, if you don’t go with us, you will lose $12,750 per physi-
cian per year.”
I would love to see how you capture and operational-
ize saving ½ second per click. As I said, this poor vendor’s
logic runs afoul of Fallacy 1 – Assuming you can capture very
small times savings – and also Fallacy 2 – Assuming you are
literally turning away patients because of internal capacity
constraints.
◾ A revenue-producing service where the healthcare orga-

nization is literally turning away patients due to capacity
limitations
◾ No other volume-based bottlenecks in related service areas
upon which the primary service is dependent
48. ROI Fallacy 3 – Automatically Assuming

Additional Patients Are a Financial Plus
for the Organization
Even if a facility is literally turning away patients because
of capacity constraints that can be addressed by a new
product, this doesn’t automatically mean that the additional
patients provide a net fnancial positive. If the incremen-
tal patients are covered by a fxed or capitated payment
(one where the healthcare organization gets a payment
for the patient each month and then has to subtract what
they spend to take care of them), or if they are uninsured,
additional volume could represent a net fnancial negative
rather than a boost. As we discussed in Chapter 1, many
hospitals recover only 25% of what they spend on caring for
the “average” uninsured patient. If the new patient added

because some staff time was freed up and that patient has
typical or – even worse – higher than average clinical needs,
the hospital could actually lose money. So, is it really fnan-
cially advantageous to add patients if you take a step back-
ward fnancially?
On balance, I should point out the difference between cov-
ering total cost of a patient encounter and covering the mar-
ginal cost of a patient encounter. When I report that Medicaid
on average only covers 87% of the cost of care, that include all
overhead costs including insurance, administrative salaries, the
cost of debt, utilities, depreciation on the facility, etc. Taking
one additional inpatient doesn’t increase the hospital CEO’s
salary or its utility costs.
So, even if the new revenue the healthcare organization
gets from treating that extra Medicaid patient falls short of
full cost coverage, it can still be fnancially advantageous
to attract them, thus blunting the negative impact of ROI
Fallacy 3.
The airline industry provides a parallel analogy. It costs
virtually the same to fy a half-full plane as one that is fully
booked. Although the passengers love the extra “stretch
room,” the only advantage of the vacant seats to the airline
are the few gallons of jet fuel saved because of the lighter
weight and the cost of however many cans of Coke are not
consumed. If the airline can add just one more passenger, it
generates signifcant revenue at almost no cost. This shows
there can be an advantage to marginal volume. Keep in mind,
though, that adding patient volume “on the margin” may
eventually require increasing staff, expanding your facility, or
adding other costs. Sooner or later, marginal costs begin to get
closer to total costs.
The point is that healthcare fnancial leaders have heard
it all, and glibly claiming increased revenue may invite some
pushback.
Either
◾ The assumption – based on reasonable evidence – that
most new patients are covered by insurance plans that are
likely to cover the cost of the care they receive
Or
◾ A conscious decision to move forward, based strictly
on marginal revenue from patients in categories like
Medicaid, Medicare, and the uninsured that do not cover
the full cost of care
Bonus Material – A Better Way to Present

ROI Projections
Now that I have trashed the way many ROI numbers are devel-
oped, I should address the question of what they should look like.
The most fun part of my job in the planning department
of the Midwestern hospital where I worked was projecting
future need for various service areas. One project involved a
consideration of expanding the number of pediatric inpatient
beds. Being a data-driven guy, I enjoyed rooting around the
available data to estimate what future volumes might look like.
Among the data sets available were current demographics of
our service area, future population growth projections, the
hospital’s pediatric market share, existing inpatient volume by
DRG, and physician-based utilization numbers.
Sometimes, if people don’t like the implications of an
analysis, they try to undercut it by challenging your numbers.
Early on in my career as an analyst, I fgured out a nearly fool-
proof way to achieve buy-in from the necessary people. Before
I displayed a single number from my analysis, I included one
or two slides listing all my data sources and assumptions. For
example, these were my data sources for the pediatric project:
◾ The zip codes in the primary, secondary, and tertiary

market areas
◾ Current pediatric market shares for each of those areas

◾ Population growth projections from the U.S. Census Bureau
◾ Our average number of pediatric admissions by DRG
within the total market area – derived from the statewide
inpatient database
◾ The fact that the hospital had recruited a new pediatrician
who would start in three months
◾ Average number of inpatient admissions for our hospital’s
current pediatricians – based on actual experience
These were all the fact-based data inputs. Then I had to make
an important assumption about the new pediatrician. Since
she was new to the area, she would not have a built-in patient
base, and, therefore, it would be unrealistic to expect aver-
age regional volume from Day 1. Instead, I assumed 20% of
the regional average for Quarter 1, 40% for Quarter 2, 60%
for Quarter 3, and 80% for Quarter 4. Starting in Year 2,
I assumed 100% of the regional average.
So, before anyone saw a single number from my analy-
sis, they saw my logic and major assumptions. I then asked,
“Before I show you the results, did I miss anything in my
assumptions, or do any of these data sources or inputs seem
wrong?” Sometimes there would be some discussion, but gen-
erally there was pretty solid agreement.
After establishing this baseline, I would then show the
results. Although I would never state it this way, my implied
message was, “Don’t argue with my conclusions if you agree
with my inputs and assumptions. Essentially, all I’m doing is
developing mathematical formulas based on these inputs we
all agree on and hitting ‘compute’ on the keyboard.”
I found this method worked like a charm. If someone
didn’t like the results, we could certainly revisit the assump-
tions, but how could they argue violently with the conclu-
sions after they bought into my data sources and logic? This
approach went a long way to defuse the controversy over
my projections.
So, how can you apply this approach to developing ROI

projections? Here are the simple steps:
◾ Identify the variables that go into your fnancial

projection
◾ Estimate a range of beneft your intervention could offer
◾ Estimate a range of how much of that beneft can
actually be captured operationally and, therefore,
fnancially
◾ Take the low end (i.e., most conservative) assumption and
also the high end (i.e., most optimistic) assumption for
each input step
You then multiply the various low-end estimates together and

do the same with the high-end ones.
Let me illustrate this methodology with a technology that
potentially speeds up the medical coding process in the health
information department. Here are my assumptions:
◾ Savings per chart using the new technology: 3–5 minutes

◾ Number of charts coded per day: 20–25
◾ Average coder salary and benefts: $60,000
Taking the low-end assumptions, you would save 60 minutes

per coder per day (3-minute savings times 20 charts per day).
The high-end yields 125 minutes per day (5-minute savings times
25 charts per day). If there are 10 FTE coders, the expected time
saving is 600–1,250 minutes. An eight-hour shift translates to
480 minutes. So, the low-end estimate could save 1.25 FTEs,
and the high-end estimate would be 2.6 FTEs. Multiplying that
by the $60,000 annual salary results in $75,000 for the low end
and $156,000 for the high end.
If the product costs $90,000 one time with a $10,000
annual renewal fee for years two and three, the three-year
total cost of ownership is $110,000. So, assuming the low
end of the savings, the product would yield positive savings

in 1.46 years with the more conservative estimate and 0.7 for
the more optimistic one. (Keep in mind that this analysis is
based on the three-year total cost of ownership. From a cash
fow perspective, it isn’t as favorable since the cash outlay is
front-loaded.)
And, this can get a bit tricky, if the more conservative ROI
still appears pretty reasonable, you might even want to double
the break-even period in order to ultra-conservative. Here’s
how to make your argument:
We identifed the variables that we agreed would

factor into any cost savings. Under the most opti-
mistic assumptions, you might be able to expect
a payback in a few as about 8.5 months (0.7 years).
But assuming all the less favorable numbers,
you should be able to recuperate your invest-
ment in about 18 months (1.46 years). What if we
doubled the most conservative recovery period
from 18 months to 36 months? Would this still be
an attractive project even if we made the most
“pessimistic” set of assumptions?
You see what I am doing. Just as in my pediatric product

line example above, I’m inviting the potential client to think
through the logic of my analytical inputs so it would be hard
for them to argue with the results.
There’s an old adage that you should never ask a question
when you don’t know what the answer will be. If you are
either the internal enthusiast supporting a particular project or
the vendor, you should be familiar enough with the climate of
the clinical or operational area to know whether a 36-month
payback estimate would kill the project. If it would, don’t go
there, and don’t do this “doubling the break-even” step. But
you might want to consider employing this logic if you think it
still makes the project viable. No one can accuse you of “bak-
ing” the numbers to make your case.
So, I recommend to my vendor clients that they take this
approach of walking through their ROI logic with their own
clients and ask them to help develop the high and low ends of
each of the assumptions that ultimately lead to the fnal pro-
jection. After agreeing on the inputs, they can run the num-
bers and see the results. Then, if it seems reasonable, they can
consider doubling the payback period.
There are two strong advantages of taking this very conser-
vative approach of doubling the payback period:
1. If your numbers are strong, you have built a rock-solid

case for how your product or service can be justifed from
a fnancial perspective.
2. Because you have extended the break-even period, you
have demonstrated to the prospective client that you are
not out to dazzle then with fimfam numbers to make a
quick sale. This goes a long way toward establishing your
credibility as a person or a company.
Here’s an additional approach to consider. Any healthcare orga-

nization that signs with you is committing to a certain dollar
amount. If you’ve done a good job of developing credible, con-
servative ROI numbers that they affrm, they should feel pretty
confdent in their decision. However, they are still taking on a
certain level of fnancial risk, and nobody likes that.
Why not offer them a money-back guarantee that your
product will, indeed, generate the fnancial advantages the
two of you agreed upon? This demonstrates remarkable con-
fdence in both your product and your fnancial performance
projections and removes all fnancial risk from the customer.
Because they will have to assign a certain level of organiza-
tional resources for implementation and training, they are still
making a tangible commitment, but you’ve removed money
as an excuse for not moving forward. If you take this route,
be sure you meticulously defne the terms of the guarantee

up front so there is no confusion down the road concerning
whether your product has indeed accomplished what you said
it would.
49. Confusing Average Hospital Cost Per Day

and Marginal Cost Per Day
The discussion above demonstrates that you shouldn’t trust
overly optimistic fnancial projections. Occasionally, you
will also fnd projections that are downright fawed. I ran
into this during the frst year of my administrative fellow-
ship at Michigan Medicine. The year was 1984, and the
medical center was in the process of moving into a brand-
new replacement hospital. One of unanswered questions
was what the university would do with the old 1920s-era
hospital building.
Many ideas were tossed around, and I ended up heading up a
team that analyzed whether we should retain a small part of the
old building for a hotel-type facility for visiting families and patients
who were well enough to be discharged from inpatient care but
might want to stay in the area for additional follow-up. Since the
health system draws from all over the state, there are many patients
and their families who live too far away to commute.
We found some hospitals around the country that had set
up programs like this, so we did a few site visits. One large
healthcare organization in the Southwest actually took the
concept one step further beyond what we were thinking.
They established a facility with around-the-clock non-medical
supervision in the hotel area to house patients who might
be well enough to be discharged a day or two earlier if they
could stay at the hospital even if they weren’t in the hospital.
Since they were still on the campus, they could conveniently
receive outpatient care if necessary. The hospital hired a non-
clinical onsite staff member to provide an overnight presence
in case a patient experienced a medical setback.
Table 12.1 Original Margin without Hotel

DRG Payment $12,000
Average length of stay 6 Days
(2 nights @ $80 per day)
Average revenue per day $2,000
($12,000 DRG payment divided by 6 days)
Hospital’s cost to provide care $11,600
(based on hospital records)
Average cost per day of 6-day hospital stay $1,933
($11,600 divided by 6 days, rounded to nearest dollar)
Net margin $400
($12,000 DRG payment minus $11,600 cost)
In a sense it was like home care, but instead of the care

being delivered at the patient’s home, it was rendered right on
the hospital’s campus. This arrangement had the added beneft
of allowing family members to stay in the same or an adjacent
room if desired.
This particular hospital identifed a few medical conditions
that lent themselves to earlier discharge as long as there was
the “backstop” of non-clinical supervision to monitor patients
overnight.
We were intrigued by the concept and spent the better part
of a day with the woman who ran the program. Table 12.1
includes the data they used to illustrate the fnancial benefts.
The hospital’s logic was that if a patient could be discharged
after four days instead of six and spend the last two days in the
hospital-hotel, the hospital would gain fnancially even if it actu-
ally covered the cost of the two-day hotel stay.
Table 12.1 shows the original net margin the hospital could
expect without the hotel. For many patients, hospitals are paid
a fat amount per discharge based on their medical condition
under the DRG system.
Table 12.2 illustrates the hospital-hotel logic. Keep in
mind, these are 1983 prices and refect 1983 length of stay.
Table 12.2 Revised Margin with Hotel

Cost to hospital for just the room $240
(2 nights @ $120 per night)
Cost to Hospital for non‐clinical residential staff $160
(2 nights @ $80 per day)
Total cost to hospital of 2 nights in hotel facility $400
(Room plus staff person)
Total cost for 4‐day hospital stay $7,732
(4 days @$1,933 per day)
Total episode cost $8,132
(4 days in hospital plus 2 days in hotel)
DRG Payment $12,000
New estimated net margin $3,868
($12,000 DRG payment minus $8,132 cost of hospital
stay plus hotel stay)
Net gain to the facility $3,468
(the difference between the original $400 margin
and $3,868 margin with the hotel)
Today, costs would obviously be higher, and length of stay

would be lower.
There are several liability and licensure issues associated
with this concept, but I won’t go there. Suffice it to say that
we were initially pretty impressed with the potential financial
benefit. It wasn’t until we returned to Ann Arbor that I recog-
nized the fatal flow in their fiscal logic.
They based their savings on average cost per day of a
hospital stay. It’s true that the $11,600 total cost divided by a
six-day stay results in $1,933 average cost per day. However,
that’s not the way costs are actually incurred. Typically, clinical
activity (tests, imaging, procedures, etc.) is most intense during
the first day or two of a stay, and then it tapers off. So, actual
costs might be $4,500 for Day 1, $3,000 for Day 2, and then
decrease from there. The actual “recoverable costs” from the
last two days of the stay are far less than the $4,000 they
touted, thereby invalidating the hospital’s estimated net
gain of $3,468.
It’s interesting that four healthcare professionals sat around
nodding our heads in agreement for a whole day while the
healthcare organization’s representative showed off her facility
and explained the fnancial benefts. It wasn’t until a couple
of days later that a lowly administrative fellow (me) saw their
miscalculation. For the record, this is not an isolated case.
Within the last year, I talked with another vendor premising
her value proposition on this exact same, fawed “average cost
per day” logic.
Recommendation:
◾ Never make this mistake! Be sure you thoroughly under-
stand how healthcare fnances work as you craft your
fnancial case. As I have said elsewhere, healthcare execu-
tives and clinicians have been bombarded with exaggerated
ROI promises, and they have understandably grown highly
skeptical.
50. Not Realizing That, Even If You Can

Demonstrate a Clear ROI, the Hospital May
Still Not Move Forward
You would think that presenting solid, plausible, defensible
fnancial projections would lead to a contract. It often does,
but you can’t necessarily count on it.
Let me provide an example where one hospital representa-
tive failed to move forward with something that made all the
fnancial sense in the world. I was talking with a colleague
who worked for a hospital association in one of the mountain
states, and he told about the process they were going through
with one of their state-funded healthcare coverage programs.

They were updating the hospital DRG fee schedule in what
proved to be a prolonged and contentious process.
There was one particular clinical area that only two or
three hospitals in the state offered, and the effect on them
was pretty signifcant. The largest provider estimated that
the proposed change would result in nearly a $2 million
annual loss, and, based on somewhat suspect data, the
health plan’s logic for making the cut for making the cut
was pretty fimsy.
My hospital association colleague explained that the discus-
sions with the state’s representatives had been dragging on for
several months and were frequently antagonistic. By this time,
he was ready to dig his heels in, partially to demonstrate that
they weren’t willing to roll over on every issue. To his sur-
prise, the representative from the hospital that would lose the
most money just kind of waved his hand and said, “Well, that’s
OK. It’s only $2 million.” My friend was stunned and wanted
to say, “Only $2 million!?! Only $2 million?!? If $2 million no
big deal, give it to me!”
It’s hard to imagine a healthcare organization walking away
from that type of money without even trying to change the
outcome. They may not have been successful, but shouldn’t
they at least have tried? This type of behavior is fairly rare, but
it does happen.
Lack of moving forward even in the face of clear fnancial
advantage can be caused by other factors:
◾ You may have brought a prospect to the point of decision

when one of the key internal players unexpectedly leaves.
This can result in others not wanting to move forward
until the vacancy is flled.
◾ The organization may have suffered an unexpected
fnancial setback requiring resources and attention to be
siphoned off in another direction.
◾ A formerly disengaged stakeholder – like a key physi-

cian or a senior executive – may introduce an alternative
vendor at the last minute and demand that the decision
be revisited.
◾ Your project may not be perceived as a high enough
strategic priority. I had an example of this at a healthcare
organization where I worked when we were renegotiating
a contract that would have allowed us to increase a com-
mission on certain sales from 3% to 6% with no down
side to us. It wasn’t a particularly high-volume area, but
the change would result in several thousand dollars addi-
tional revenue per month. To those of us who worked
in that area, it was a classic “no brainer.” But for some
reason, the senior executive who had to sign off on the
change kept dragging his heels, and we ended up losing
about fve months of the enhanced revenue. He appar-
ently didn’t consider moving forward a high enough pri-
ority to fnally sit down and give fnal approval or didn’t
have the emotional bandwidth to address it in a more
timely manner.
Recommendation:
◾ You may have a terrifc product with ironclad fnan-
cial projections that clearly demonstrate its value.
Nevertheless, a potential customer may not feel any sense
of urgency to move forward. The best advice I can give
is to recognize that these situations pop up from time to
time. Do your best to gently remind them of the clear
benefts your product offers without becoming pushy
to the point of alienating the organization.
Chapter 13
Other Financial Pitfalls
The fact that I devoted an entire chapter to Return of

Investment (ROI) issues demonstrates how signifcant that
issue is. But there are 11 other fnancially oriented pitfalls in
this chapter, and any one of them can also derail a sale.
51. Projecting Overly Rosy and/or Simplistic

Sales Numbers
Every entrepreneur is understandably excited about the pros-
pects for their new venture. Even though they recognize inher-
ent risk, they wouldn’t move forward unless they believed they
had something the market craves.
Although optimism is good, unless it is mixed with a strong
dose of reality, the company may be setting itself up for sig-
nifcant hardships.
I was speaking at a healthcare technology conference in
California a few years ago when I had the chance to chat with
one attendee who was enthusiastic about a new technology
he was developing to help patients with chronic pain. During
one of the afternoon breaks, he showed me his pitch deck for
potential investors. It followed the classic model of describing
211
the clinical problem, showing the potential market size,

describing his product, and then projecting sales.
According to his statistics, chronic pain is one of the lead-
ing medical complaints worldwide, and he estimated the
potential market at 800 million people worldwide. His sales
projections traced the classic “hockey stick” with modest sales
in Year 1, good growth in Year 2, and explosive growth start-
ing in Year 3, and continuing forward. (This type of sales
projection gets its name from the fact that the sales curve
resembles a hockey stick.)
From what I could tell, he had a potentially valuable clini-
cal product, but his market size and market growth estimates
were absurd. When he identifed 800 million people who
could potentially use his product, was he seriously considering
selling to patients in Fiji, Uganda, and Iceland? And what basis,
beyond wishful thinking, did he have for projecting exponen-
tial growth starting in Year 3?
His wild-eyed enthusiasm creates two signifcant issues:
1. A credibility problem with potential investors and

customers – I recognize that including outrageously opti-
mistic market size numbers is fairly common in investment
pitches, but claiming potential market size of 800 million
without any discussion of a sales structure or consideration
of whether or not potential patients in Vietnam could pay
for the technology seems highly nonsensical.
2. Potential cash fow issues for the entrepreneur – If he ends
up believing his own sales projections, he could foolishly
build his infrastructure to support his numbers. As I will
address in Pitfall 76, healthcare sales cycles are notoriously
long. I tell my clients new to healthcare to develop a con-
servative projection about how long it will take to reach a
critical mass of sales, double that number, and then recog-
nize that it may still be optimistic. More than one start-up
has been forced to fold because sales failed to materialize
according to their business plan projections.
Other Financial Pitfalls ◾ 213
Recommendations:
◾ When it comes to your “public” sales projections, of course
you need to be upbeat. Few investors are likely to fund a
company that projects breakeven six years out. But keep in
mind that both investors and potential healthcare clients
have been barraged by unrealistically rosy sales numbers,
and your credibility with both groups will suffer if you dis-
play naïveté by your fnancial projections being improb-
ably favorable.
◾ When it comes to developing your internal sales numbers,
do yourself a favor and be extremely conservative in your
growth projections. It’s OK to be a bit more sanguine pub-
licly and plan for a less optimistic growth curve privately to
make sure you don’t run out of capital. If you can sur-
vive a six-year breakeven, you should be in great shape.
My budget approach has always been to assume revenue
growth on the low side and expenses on the high side. If
the budget works with those assumptions, there’s a good
chance you will come in at budget or even more favorably.
◾ Early in your conversation with potential healthcare cli-
ents, be sure to discuss their capital budgeting calendars
and do everything you can to meet each window, recog-
nizing that each step may take longer than you would like.
Be sure to consider these timelines as you develop your
revenue projections.
52. Triggering Financial Thresholds for Budget

Limits, Board Approval, and/or Other Fiduciary
Requirements
Healthcare organizations have strict requirements regarding
purchasing approvals. Hospital department heads are typi-
cally authorized to spend up to relatively modest levels, often
$10,000–25,000. VPs and CEOs have higher limits, but even
they must seek board approval over a certain level, often

$100,000. A few organizations require CEO approval for all
capital items. These limits are not necessarily a problem
but can add extra steps and time to the purchasing process.
Furthermore, there may be provisions in a healthcare organi-
zation’s debt structure that require higher level approvals for
expenditures above a certain amount.
Recommendations:
◾ Be aware of this issue and be sure to allow for the possible
extension of the acquisition time frame.
◾ You may be able to avoid some of these trigger points by
restructuring your fnancial offering. The thresholds typi-
cally apply to capital acquisitions or capitalized leases.
You might be able to offoad some costs to the hospital’s
operating budget or into different modules that could be
phased in over subsequent fscal years or assigned to dif-
ferent departments. Just be sure to maintain transparency
and integrity in your alternative fnancing proposal.
53. Triggering Additional Insurance

Requirements, Plus Possibly Having to Name
the Health System a Benefciary
Healthcare organizations have become extremely concerned
about data breaches and cyber-security issues. Any product
that touches a hospital’s IT infrastructure or databases raises
signifcant security red fags. Some healthcare organizations
now require vendors to secure additional cybersecurity insur-
ance coverage and possibly name them as a benefciary on the
policy.
Additionally, they may require enhanced limits on errors &
omissions, professional liability, workers’ compensation, or
even automobile coverage.
Recommendations:
◾ Be aware of this possible requirement and budget for it,
both in terms of your fnancial planning and in your
implementation timelines.
◾ You might consider proactively mentioning your willingness
to secure additional insurance. It will demonstrate your
awareness of and responsiveness to cybersecurity issues.
⭆
Top 10
54. Not Fully Understanding Overall
Financial Incentives
Many new hospital offerings promise to save money by bet-
ter coordinating care, lowering length of stay, and/or reducing
readmissions. Entrepreneurs are aware of Medicare’s efforts to
reduce unnecessary readmissions through a program called the
Hospital Readmissions Reduction Program (HRRP). HRRP is a
penalties-only program – there is no “bonus” for doing well –
where hospitals are fnancially penalized on payments for all
Medicare patients in a subsequent fscal year if they had exces-
sive readmissions within 30 days of patient discharge. Medicare
only tracks readmissions in a few diagnostic categories, but the
future penalties apply to all Medicare patients, not just the ones
in the categories that are measured. Since so many inpatients
are covered under Medicare, this penalty can be a real fnancial
blow. As often happens, Medicare sets the pace for other pay-
ers, and several of them have recently started similar programs.
Some vendors don’t understand that not every single read-
mission results in a direct fnancial loss. Penalties kick in when
the facility exceeds the “allowable” level.
There are several factors that affect the fnancial impact of
any given, single readmission:
◾ Which payer covers the patient – Medicare was the frst –

and for a while the only – major payer imposing readmis-
sion penalties. Many commercial payers have recently
started to follow suit. So, although this is a growing trend,

readmissions penalties are not yet universal.
◾ What the diagnosis is – There are currently only six
clinical categories – all high volume – that count toward
the Medicare penalty. Many Medicare readmissions fall
outside the six. Additionally, each commercial payer that
imposes this type of penalties has its own set of cases
they track.
◾ Whether the hospital is bearing fnancial risk for entire epi-
sode of care – If the healthcare provider has assumed full
fnancial risk for an entire episode of care, every readmis-
sion represents a fnancial expense to the hospital without
additional payment. But if it is a fee-for-service patient –
and many Medicare patients are – the hospital receives a
separate payment for that readmission. So, avoiding the
readmission means losing revenue in the short term.
◾ Whether new readmission will trigger a higher penalty
or any penalty at all – As I stated, hospitals are allowed a
certain number of Medicare readmissions in the covered
categories before penalties kick in, and the magnitude
of the penalties increases if readmissions reach higher
thresholds. If a hospital’s current “baseline” readmission
rate is already very low, a few additional readmissions
may not thrust it into the penalty box. So, not every
single readmission, even within the Medicare six covered
clinical categories, necessarily results in a fnancial loss.
◾ The time frame under consideration – There is a lag of up
to four years between the time a patient is discharged and
when Medicare penalties take effect. For example, penal-
ties imposed in federal fscal year 2019 (October 1, 2018
through September 30, 2019) consider discharges from
July 1, 2014 through June 30, 2017. Some hospitals are so
fnancially stressed that they may prefer to receive the
additional payment now and worry about any possible
penalty down the road. A very small number of execu-
tives might conclude that, for a variety of reasons, they
might not be working at the same hospital three or four

years down the road. If they may not still be there when
the penalties start, and if the hospital is hard-pressed for
revenue right now, they might not be quite as concerned
about excessive readmissions and any subsequent pen-
alties. This dynamic is reminiscent of a recent Dilbert
cartoon where the slacker Wally is making a presentation
about a new product he says would be unproftable for
the frst nine years but then surge into proftability in year
ten. When his boss points out that Wally is scheduled to
retire in nine years, Wally waffes and has nothing to say.1
I’m not implying any dishonesty on anyone’s part, but
time frames sometimes do enter into mental calculations.
Recommendation:
◾ Stress the positive impact your product or service has on
addressing the readmissions issue. Reducing them is a
clinical goal all hospitals embrace. However, recognize that
the qualifers listed above might affect any given hospital’s
sense of urgency about reducing readmissions, thereby
rendering your offering somewhat less compelling than
you think it might be.
⭆ 55. Not Appreciating the Misaligned

Top 10
Financial Incentives between the
Environment Asking for Greater Care
Coordination Utilizing the Lowest Acuity
Interventions Possible and Most Payers
Reimbursing on a Fee-for-Service Basis
Although medical care is clearly based in science, not every
care decision is black and white. For example, as a patient in
a post-acute rehab facility approaches discharge, the supervis-
ing physician must decide whether or not they are ready to
go home. Many patients discharged from a post-acute rehab

hospital require home care. Depending on the level of care
needed, the cost of the home visits may be less than an addi-
tional day in the rehab facility. However, revenue to the rehab
physician and facility stops once the patient leaves. So, if the
decision to discharge vs. keep the patient for another day is
50/50 and both options are equally clinically responsible, the
fnancial aspect may tip the decision in favor of keeping the
patient the extra day.
A product that makes it easier to treat a patient at home or
in some alternate setting can move the needle toward earlier
discharges. This may be in the patient’s best interest, but you
must realize that you may be asking the healthcare organiza-
tion to forego some revenue.
This dynamic would be minimized if all providers were
paid based on total cost of an episode of care and the pro-
vider organization either owned or contracted for all “down-
stream” services. In that case, if the health system bears 100%
of the fnancial risk, offering care in the last expensive set-
ting clearly makes fnancial sense. Remember, though, that
I reported in Chapter 1 that 78% of care is still paid under a
fee-for-service rather than any type of bundled or incentiv-
ized care.2 The good news is that there are a number of ini-
tiatives – Value-Based Purchasing, bundled payments, Pay for
Performance and others – designed to better align care across
the continuum.
Recommendations:
◾ Until and unless the industry fully arrives at the point
of strong incentive alignment, providers will be living in
a somewhat-schizophrenic fnancing climate. As early
on as possible, try to assess what percentage of their rev-
enue comes from traditional fee-for-service care whether
they get paid for every procedure or service they provide
instead of being part of a unifed payment or incentivized
arrangement.
◾ Remember that providers’ default is to always do what’s

best for the patient. However, you must recognize that you
may be asking them to cut into their revenue stream on top
of having to pay for whatever product or service you are
offering. This can be especially diffcult if they are fnan-
cially stressed.
56. Not Knowing the Specifc Payment Rules

As I explained in Chapter 1, the term “reimbursement” is really
a misnomer. Reimbursement usually means someone spent
money for an approved expenditure, subsequently submitted a
receipt, and ultimately got paid back all they spent.
This is not how it works for inpatient care, where hos-
pitals are paid for most inpatient admissions on a fxed
fee basis. As I’ve mentioned elsewhere, back in 1984, the
Medicare program implemented a payment system called
Diagnosis-Related Groups (DRGs) where inpatients were
categorized into one of about 500 (since expanded to about
1,000) categories based on their underlying clinical condition,
severity of their case, some additional medical conditions,
and other factors. Most other payers have since adopted the
DRG approach, so the amount hospitals are paid for inpatient
care does not go up if they provide additional services while
they are hospitalized unless the patient ultimately gets classi-
fed to a more intensive DRG.
As I explained in Pitfall 3, new technologies sometimes
face an uphill battle if they can’t replace an older one that
is already baked into the DRG payment level. Another way
of stating this is that the existing DRG takes into account
average costs of providing care using the technologies that
are currently employed most frequently. A vendor offering
a new product introduces a new cost element that has not
been incorporated into the DRG payment, and the payment
doesn’t go up even though a new element is added. If the
new product replaces an older one and the cost of the new
approach is less than or equal to the old method, that sup-
ports moving forward. Not every newer approach, though,
replaces an existing one, so the net impact is increased cost
without increased payments. It’s not hard to conclude why
hospitals don’t always jump at these new approaches.
I once met with an entrepreneur who developed a new
device for cardiac care. He had just completed a technology
incubator program based on the West Coast and approached
me about getting some market insights. I asked him which
DRGs he thought most of his patients would fall into and, to
my surprise, he didn’t have any idea. I was amazed he could
go through a technology incubator without ever having had
to come to grips with something as basic as knowing which
DRGs he would likely encounter. He clearly needed help with
his fnancial projections.
A few resource-intensive DRG categories do allow carve-out
or additional payments for unusually expensive technologies
such as certain implantable devices, but these are defnitely
the exception, and getting insurance companies to offer addi-
tional payments can be a lengthy process.
Recommendation:
◾ If you are new to the healthcare feld, you would be wise
to fnd a trusted advisor who can help you think through
the fnancial implications of your product and proposed
fnancial logic.
57. Offering a Project with Negative

Implications on the Workforce or Other
Operational Areas
Vendors often focus largely on the acquisition costs of their
product and don’t always discuss possible impact on either
workforce or other operating costs.
Technology can affect staffng in three ways:
1. Reducing head count through increased effciencies –

This can be seen as either a plus or a minus, depending
on who is viewing the possible change. From an overall
budget standpoint, reducing staff can help the organiza-
tion’s budget, but department heads who stand to lose
head count might see this a threat to their status within
the organization.
2. Freeing up some employees to be redeployed to other
functions within the organization – This may be well
received if the organization perceives a need to reconfg-
ure its workforce without reducing total count. A technol-
ogy that automates fairly routine processes may make it
possible to reassign some people to other, less-automated
areas. However, there must be a match of skill levels
between the old job and the possible new assignment.
A clerical person cannot shift to a job requiring clinical
skills. Furthermore, any move could involve some kind
of training period, which could create some down time
during the learning curve and probably some incremental
training costs.
3. Requiring additional staffng – In this day of relentless
cost pressure, adding staff can be a deal-breaker. Staff in
many departments are often stretched to the max. One
area potentially susceptible to needing additional staffng
with a new technology is the IT department. A product
that allows the department to bring a formerly outsourced
function in-house might be appealing from a product
control and fexibility standpoint, but if it required extra
bodies, approval might be hard to come by.
Recommendations:
◾ If your project would likely reduce staff, try to determine
if that would be perceived as a positive or a negative and
shape your messaging accordingly.
◾ If it would allow redeployment, bring examples from other

clients who have successfully followed this strategy and
how it benefted them in the long run.
◾ If it requires additional staff, do your best to show how the
benefts of adopting your product offset the negatives.
◾ Be upfront about additional operational costs – and also
capital expenditures – the organization must consider as
they evaluate your project. They will eventually fgure out
the extra costs involved, and you want to avoid creating
suspicions that you are not being entirely transparent with
them.
58. Potentially Squeezing Some Providers Out

of the Revenue Stream
An old saying goes, “One person’s expense is another per-
son’s revenue.” As I have said, people in the healthcare
feld are dedicated to address human ailments. At the same
time, individuals always act with a certain amount of self-
interest, including protecting their fnancial well-being. New
technologies can threaten someone’s fnances in several
possible ways.
◾ Displacing existing approaches – The Apple Watch 4’s

ability to provide Food and Drug Administration (FDA)-
approved screening electrocardiograms (EKGs) is an
example of largely eliminating a clinical function from
the traditional provider setting. Instead of paying hun-
dreds of dollars for an EKG in a cardiologist’s offce,
clinic, or hospital setting, patients can spend the
$400 needed to buy the watch (or use the watch they
may have already purchased) to get screening results
that can be transmitted to their physician. If the
screening results indicate a possible concern, the
physician can order a more traditional EKG. And remem-

ber that another advantage of using the Apple Watch
as a screening device is that it is the patient’s to keep.
In this Apple Watch scenario, the cardiologist is still
engaged with reading the results, but using the watch
eliminates the facility-based EKG, which saves money for
the patient but also decreases the healthcare organiza-
tion’s revenue.
In April 2019, the FDA cleared a plug-in device for
iPhones with an EKG function that is even more robust
that of the Apple Watch.3 This development has the
potential to further erode institutional providers’ revenue
stream.
◾ Patient portals, telephone consultations, and other forms
of virtual visits for less serious conditions can be very
convenient for patients. If insurance companies cover vir-
tual encounters at all, they often pay less than they do for
the in-person visits they are replacing. To the extent pay-
ers don’t reimburse these patient encounters, every online
interaction that supplants an offce visit could represent
lost revenue for the clinician.
However, there are still two ways adding virtual visits
may be fnancially attractive:
– If the eliminated “unnecessary” offce visits open up
the schedule for additional patients with more serious
conditions and for which the physician would get a
higher payment
– If the provider has available capacity. A Health Affairs
research article on direct-to-consumer telehealth
(where patients have phone or videoconferenc-
ing access to physicians) concludes that only about
12% of 300,000 direct-to-consumer telehealth visits
between 2011 and 2013 replaced in-person encoun-
ters while the other 88% represented new visits, tap-
ping into previously unmet needs. The article’s abstract
concludes, “Direct-to-consumer telehealth may

increase access by making care more convenient for
certain patients, but it may also increase utilization
and health care spending.”4
◾ Playing into professional rivalries among different pro-
vider groups – Technology can make “turf wars” among
physician specialties worse. For example, a technology
that might allow general surgeons to perform procedures
that are traditionally the purview of surgical specialists
is likely to be celebrated by the general surgeons but
lambasted by the specialists. If a vendor presents such
a proposal in a healthcare organization with both gen-
eral surgeons and surgical specialists, they should expect
vastly differing reactions. Similarly, internists, family prac-
titioners, and obstetricians/gynecologists often offer over-
lapping services, and a new technology targeted at, for
example, OB/GYNs could create suspicion from the other
specialty areas.
◾ Shifting care delivery location – Telemedicine allowing
patients in remote areas to consult specialists in other
geographies could lead to the patient transferring much of
their care to the new location. For example, a telemedi-
cine visit may ultimately result in the patient traveling to
visit the remote delivery site if advanced services are not
available locally. The patient may decide that the care
at the new location is so good that they transfer some
of their loyalties there, even for needs currently being
treated locally. This may not happen routinely, but the
possibility may still lurk in the back of the referring orga-
nization’s thinking and perhaps lessen their enthusiasm
for the new technology.
So, there are several ways introducing a new technology could

negatively affect some providers’ revenue sources, and you
should take steps to minimize the impact.
Recommendations:
◾ Until more insurance companies pay adequately for
electronic visits, you must recognize that providers must
always consider the potential negative impact of replacing
certain patient visits with lower paying virtual visits. Be
sure you can present a credible “payment strategy.”
◾ If your product facilitates virtual visits, try to ascertain if
the practice you are targeting has a schedule with a lot of
“unnecessary” visits. If that is the case, your product could
open up additional appointment slots for more seriously
ill patients and which command higher fees. It could also
allow the practice to bring in additional revenue from the
virtual visits. Alternatively, if the offce has excess capacity
it may be able to attract patients currently not receiving
any care or getting it elsewhere.
◾ Although no one will buy your product if you can’t make
a reasonable case for additional net revenue, you can
also stress the patient satisfaction aspects resulting from the
added convenience. Just realize that the patient satisfac-
tion argument won’t carry the day if you can’t present a
solid fnancial picture.
◾ If you are likely to encounter the problem of allowing
lower levels of clinicians to treat more acute cases than
they traditionally have, expect those who potentially lose
out to raise quality of care issues. Although quality should
always be frst and foremost, some providers may use this
argument as a defensive lever. The most effective thing you
can do is load up with as much credible clinical research
that supports your contention that some screening-type
visits can be handled by appropriately credentialed staff
extenders.
◾ Regarding the telemedicine example, few sending orga-
nizations will verbalize the fear of patient “leakage,”
but recognize that this apprehension may exist. You can
stress with the potential “sending” party the benefts of
stronger working relationships with remote “receiving”

providers. Perhaps the larger healthcare organization
would be willing to send clinicians representing a vari-
ety of specialties to the smaller facility in the remote area
one day a week, thus strengthening the services available
locally.
59. Experiencing One or More of Four

Situations That Handcuff a Potential Customer
There are four things that could potentially prevent an orga-
nization from working with you even if you have signifcant
internal support:
1. Running into the requirement that all purchasing deci-

sions be made at the corporate level – Since many health-
care organizations require centralized approval for many
or most purchases, the local facility has little ability to
approve moving forward. Sometimes, the best you can
hope for is that someone at the local level likes what you
have and is willing to push it upstream. But this sets in
motion an entirely different and complex set of approval
requirements.
2. Coming out on the wrong end of “contract lock” – This
can be a problem for a vendor who is either:
– Offering a commodity-type product and is trying to
displace a competitor
– Proposing an innovative product that introduces a new
way to address a problem
In either case, the potential client may have
limited fexibility because of preexisting contrac-
tual restrictions. Even if you have a revolutionary
approach with a tech product that leapfrogs the status
quo, a binding agreement may keep you on the
bench until the clock runs out.
3. Asking a prospective client to abandon their previ-

ous technology investment – Some technologies like
Electronic Health Records (EHRs) require tens of millions
of development or implementation dollars. If the potential
client has recently made a signifcant investment in their
current solution, the likelihood of them abandoning it
before the projected depreciation date is very small.
4. Losing out because of the hospital’s commitment to their
Group Purchasing Organization (GPO) – Some GPOs link
signifcant rebates or other fnancial benefts to customer
loyalty. An internal purchasing manager may have great
diffculty going outside their GPO.
Recommendations:
◾ If the issue is decisions being made at the corporate level,
you will have to decide if you want to go down that road
with the central offce. In general, some corporate offces
can be somewhat less likely to go with a start-up than with
a more established company, so take that into account.
◾ There is little you can do about the contract lock problem
or the “sunk” investment in another technology if the exist-
ing vendor is delivering on the agreement and can’t be
terminated “with cause.” If you suspect either contact lock
or sunk costs may be an issue, try to identify this early on
in your conversations with your potential client and agree
to the best time to pick up the conversation in the future.
◾ In some cases, your potential client may be experiencing
unacceptable performance from their current supplier
which might form the basis of a breach of contract situa-
tion and possibly allowing for an early termination. You
should not get in the middle of that fght, but it may be a
question you could at least raise.
◾ If you consistently run into the GPO restriction, consider
approaching some of the major GPOs to see if it makes
sense for you to affliate with them to circumvent this
problem.
60. Failing to Offer an Adequate Tiered

Structure in Your Pricing Schedule
People who are newer to the healthcare world don’t always
appreciate the huge variability within the market. As we dis-
cussed in Chapter 1, hospitals vary from huge 800+-bed facili-
ties that anchor a large health system to rural, 25-bed Critical
Access Hospitals. Some rural facilities may only have an aver-
age daily census of three or four patients.
Similarly, physician practices vary tremendously, from a
huge, multi-specialty practice that is part of a major health-
care delivery system to a single-physician, solo practice.
Of course, most vendors know this, but, when it comes
to doing business with various healthcare organizations,
they may not fully appreciate the implications of these
differences.
Everyone within healthcare is used to the fact that bigger
providers often pay far more than smaller ones do, but this
can look very different depending on which of these three
types of product or service is under consideration.
1. Ones involving physical assets such as plastic, metal,

textiles, etc. Examples include hospital beds, or equip-
ment, medical supplies, and construction materials. Each
item sold has a direct cost to the supplier, and margins
are sometimes very slim. Vendors are used to offer-
ing volume-based discounts for these products. It only
makes sense that a hospital buying 200 hospital beds for
their expansion would pay less per bed than one pur-
chasing three replacement beds. Consequently, vendors
often develop a pricing schedule that refects volume
but only offers maximum discounts that might be in the
30–40% range.
2. Ones that require a vendor’s dedicated staffng efforts
such as customized throughput studies, individual market
analyses, or other tailored consulting projects. Analyses
at a larger organization might involve talking with more

individuals than at a simpler organization, but both are
still labor-intensive, meaning a project for a smaller facil-
ity might require nearly as many staff hours as one for a
larger organization. Assuming the same hourly rate, total
price for both types of institutions may not be all that
different.
Vendors also realize that the cost of closing a deal at
a rural facility could be nearly as high as it is for a major
medical center. Both typically involve multiple visits, and
many rural hospitals are located hours away from major
airports, requiring additional travel time.
3. Software-driven analyses that include establishing pro-
cesses for data collection, cleansing and loading. After the
protocols are in place, future data submissions for data
projects can pretty much run themselves. A good example
of this type of project is a state-wide patient discharge
data program where every hospital contributes data and
can then access software that allows them to analyze their
market areas.
Much of the work after the initial setup can be auto-
mated. Participants submit their data on a quarterly basis,
and algorithms detect high-level data anomalies. The
vendor’s staff then steps in to individually work with the
submitting hospital to correct the errors, but most of the
other program’s processes are automated.
After the statewide database is stable, all hospitals can
access the software to conduct whatever analyses they
wish to do. Group training classes are available to all par-
ticipants, so there is relatively little incremental cost to the
vendor for adding a new hospital.
The bulk of the vendor’s costs for these programs lies
in the initial intellectual property that went into estab-
lishing the data cleansing protocols and algorithms, into
securing the hardware required to house the data and
the analytic software, into designing the software itself,
into actually collecting the data, and into conducting the

ongoing collective meetings available to all participants,
regardless of size.
The very largest hospitals that are a part of projects
like this can sometimes pay as much as 30 times what
the smallest ones pay. Because there are no tangible
products or materials involved, the vendor can pool
the total project costs and divide them however they
see ft. This can appear very arbitrary, but it does allow
the vendor to create a pricing structure that is not
likely to categorically exclude any particular type of
participant.
The dynamics are similar for mobile apps. By the time
the developer is ready to start selling the app, the major-
ity of the costs have already been incurred through the
development process. Since adding a new healthcare
organization user adds virtually no cost, the vendor is free
to charge whatever amount they feel is needed to cover
development costs, sales costs, ongoing support, and
proft.
So, as you develop your pricing approach, your frst step is to

determine if you will offer volume-based discounts for physi-
cal products (category 1) or customized personnel-driven work
(category 2), or if you will develop a sliding scale for a less
tangible service (category 3). Discounts (for categories 1 and 2)
are pretty standard and straightforward: the higher the volume,
the greater the discount. Category 3 requires some creativity.
I have seen that for category 3 projects, most vendors rec-
ognize to some extent the differences among organizations.
Consequently, they often have a few – but not enough – price
categories. Just having three or four buckets is not adequate.
Some products have as many as eight or ten.
Once you determine that you need a sliding scale, the next
question becomes the basis by which you categorize hospitals.
Here are some possibilities, along with the issues you might
encounter:
◾ Number of beds – The number of licensed beds is

publicly available, since this is regulated by each state.
However, most hospitals actually staff and operate fewer
beds than they are licensed for. They are typically reluc-
tant to delicense beds since getting them back may be
hard. In states with Certifcate of Need (CON) regula-
tions, a hospital can sometimes agree to reduce its bed
count as part of a CON approval for a different project
like adding operating rooms, so licensed beds have real
value in those cases. An alternative is using the number
of staffed beds to determine cost. But since the number of
staffed beds can change rather frequently, getting accu-
rate counts can be diffcult. So, setting price based on the
number of licensed beds rather than staffed beds is more
straightforward.
◾ Number of admissions per year – This information is
generally available, but it is becoming less relevant as
hospitals shift more of their focus to outpatient care.
There are some formulas that “translate” a certain level
of outpatient volume to “inpatient equivalents.” Getting
access to uniform inpatient equivalent data may be a
challenge.
◾ Financial information, either revenue or expenses –
This can also be diffcult to get on a timely basis. Some
states require this information to be published, but
vendors who operate in multiple states face the addi-
tional challenges of slightly varying defnitions of costs
or reporting timelines that may not match up from state
to state.
Based on ease of getting the information needed, using

licensed beds or annual admissions may be the best options.
There are two other issues relating to price schedules you

must consider. The frst is whether you charge a system based
on each hospital individually or if you roll them up together
and consider them a single entity. This is a growing issue as
more and more hospitals join systems. Many price schedules
I have seen that charge hospitals individually – adding up the
cost each hospital pays – result in a very high total cost and
a very high cost per hospital. This is true even if the pricing
approach includes discounts for multiple hospitals within the
system.
Figure 13.1 compares discounts based on bed size – charg-
ing each hospital individually – and using a fee schedule
based on bed size and rolling up the system hospitals into a
single entity.
The top of the chart displays two different pricing
approaches:
1. One with discounts decreasing with bed size – It may

seem counter-intuitive to give a bigger discount to the
smallest participants, but this is done to acknowledge
smaller hospitals’ tighter fnancial situations.
2. A second with a fat fee that increases with bed size
The bottom half shows pricing under each method. Under the
discount approach, each of the fve hospitals in the Big System
is charged as a separate entity. The starting price is $7,000 per
hospital, but various discounts based on bed size are applied.
This approach results in a total system cost of $22,050, or an
average of $4,410 per hospital. As seen at the bottom of the
chart, a single Big Hospital with 661 beds would pay $5,950
($7,000 minus a 15% discount).
The alternative fee schedule approach combines all fve
of the Big System hospitals and treats the system as a single
entity. There is a certain logic in doing this since, typically,
the sales and negotiating process involves one set of people
representing the whole system instead of fve sets of players,
Bed Size Discount List Price = $7,000 vs. Fee

25 beds 50% $1,000
or less
26–100 45% $1,700
100–200 40% $2,400
201–300 35% $3,100
301–400 30% $3,800
401–500 25% $4,500
501–600 20% $5,200
601–700 15% $5,900
701–800 10% $6,600
801–900 5% $7,300
901 or more 0% $8,000
Percentage Discount Fee Schedule
Big System
Beds Price Discount Cost .
Hospital A 497 $7,000 25% $5,250
Hospital B 25 $7,000 50% $3,500
Hospital C 78 $7,000 45% $3,850
Hospital D 345 $7,000 30% $4,900
Hospital E 201 $7,000 35% $4,550
Total 1,146 $22,050 $8,000

Cost per $4,410 $1,600
Hospital
Big Hospital 661 $7,000 15% $5,950 $5,900
Figure 13.1 Contrasting Pricing Approaches.

one from each of the hospitals. Similarly, if there is data sub-

mission involved, it is usually coordinated through a single
point. So, the vendor’s workload is reduced a bit because of
the streamlined operating process of funneling all activities
through one person instead of fve.
Since the total bed count for Big System is 1,146 it ends up
in the highest category, resulting in a $8,000 charge for all fve
hospitals. This translates to an average cost per hospital of
$1,600, which is far better than the $4,410 per hospital under
the discount model.
If you stand back and view these alternative methods from
the perspective of both the Big System and the Big Hospital,
the aggregated fee schedule approach seems more equitable.
Under the discount arrangement that treats each hospital indi-
vidually, the Big System must pay $22,050 while the single Big
Hospital pays only $5,950. I could easily imagine Big System
declining to participate because of the perceived inequity
of having to pay nearly four times as much as Big Hospital,
which they might consider to be a competitor to some extent.
The fee schedule model with the Big System hospitals
rolled up results in a total charge of $8,000 for the Big System
and a charge of $5,900 for Big Hospital. This seems to be a
more equitable differential.
I should also point out that the total payment to the vendor
under the fee schedule model ($8,000 for Big System + $5,900
for Big Hospital = $13,900) is far less than the one under the
discount arrangement ($22,050 + $5,950 = $28,000). However,
you must weigh the likelihood of the Big System taking a pass
entirely because of the high price. If they were to do this, you
would not only lose all the revenue from the Big System, but
you would also lose the prestige of having them in your project.
Clearly, setting a pricing schedule is more of an art than it
is a science. Before you go public with the fnal pricing, you
should create several versions and brainstorm internally to
evaluate whether it appears reasonable and equitable for all
potential participants. When all is said and done, you have to
make sure that your estimated revenue will fully cover your
costs plus whatever proft you need, so it’s important to thor-
oughly weigh your options and the likelihood of various orga-
nizations joining in at different fnancial levels.
As I said, there are two additional issues that must be
considered in setting your pricing. The frst is whether or not
to consider system hospitals as a single entity for billing pur-
poses. To me, the clear answer is yes.
The second issue matters if you are using a pricing sched-
ule and are simultaneously selling your product to various
types of organizations such as hospitals, physician practices,
nursing home, hospice programs, etc. If you are using bed
counts or admissions for hospitals, you must determine an
appropriate equivalent measure for the other provider types.
It is a challenge to develop measures that will be perceived
as fair to all parties. Even using revenue as the basis for a fee
schedule can be tricky since health system revenues can be
in the billions while many smaller organizations have far less
income. Determining break points for your pricing tiers is
challenging, but it can be done.
Recommendations:
◾ Using discounts based on volume generally make sense for
projects involving physical assets or require dedicated staff
times (categories 1 and 2 above).
◾ If you use a sliding scale, make sure you develop a pric-
ing structure that is perceived as fair to all your potential
clients. Be ready to explain your logic if you start getting
pushback.
◾ Carefully consider which approach (beds, revenue,
expenses, etc.) is the most appropriate for setting your price
schedule. Licensed beds or annual admissions are prob-
ably the simplest to administer, and hospitals are used to
these methodologies.
◾ Generally, you are better off treating a system as a single
entity rather than individual hospitals.
◾ Before you “go public” with your pricing, make sure there
are no logical inconsistencies in your pricing, such as
a small clinic having to pay more than a medium-sized
hospital.
61. Failing to Offer Flexibility in Your Payment

Structure
As I have repeatedly said, healthcare organizations face widely
diverse circumstances, and some fourish while others strug-
gle. For example, a 300-bed hospital with a new facility in an
affuent suburban area is far more likely to have a favorable
fnancial position than is a similarly sized inner-city institution
operating in a worn-out 1950s-era building.
The suburban hospital may be able to write a check
for your project while you may have to get creative for the
other one. As a result, you should take these differences into
account as you structure your fnancial terms.
Recommendations:
◾ Consider whether you are potentially losing customers by
not offering some fexibility in your payment approach.
◾ Develop various fnancing options, such as purchasing
your product out-right, signing an extended lease, agree-
ing to a lease-purchase option, or combining cash outlay
with a percentage of new revenue generated by or sav-
ings resulting from your product. This last approach can
become a bit cumbersome since you have to develop a
mechanism to verify actual volumes or agree on how sav-
ings will be defned. Also, you must consult competent
legal counsel to be sure you avoid any payment approach
that violates anti-kickback regulations tied to patient vol-
ume. Finally, since offering extended payments increases
your fnancial exposure, consider building in extra com-
pensation to balance your increased risk.
End Notes
1. Scott Adams, Dilbert, April 14, 2019.
2. Kelly Gooch, “Health system executives expect 25% of care
delivery payments to be value-based in 2019,” Becker’s Hospital
CFO Report, February 21, 2019, accessed March 8, 2019.
3. Amanda Capritto, “The FDA just cleared an iPhone ECG sen-
sor that beats the Apple Watch,” https://www.cnet.com/news/
the-fda-just-cleared-an-iphone-ecg-sensor-that-beats-the-apple-
watch/, accessed April 26, 2019.
4. J. Scott Ashwood, et al., “Direct-to-consumer teleheatlh may
increase access to care but does not decrease spending,” Health
Affairs, vol. 36 , No. 3, March 2017, article abstract accessed
online December 19, 2018.
Chapter 14
Legal and Regulatory

Pitfalls
Thousands of laws govern healthcare delivery. This book is

not designed to provide legal advice. There are many quali-
fed resources that can do that, but I don’t happen to be one
of them. In this chapter, I only point out two legal problems
I have seen trip up more than one vendor and highlight two
regulatory requirements you must remember.
Regulations play a crucial role in ensuring compliance with
recognized safety standards and best practices. Few industries
are as regulated as healthcare is, and it’s vital that vendors
understand and fully comply with all relevant federal and state
regulations. Most of these requirements apply to healthcare
providers, but there are a few that you as a vendor should
understand and comply with.
62. Shooting Yourself in the Foot by Insisting on

Overly Restrictive Non-Disclosure Agreements
I already addressed the Non-Disclosure Agreements (NDAs) in
Pitfall 18 (the possible negative effect on recruiting qualifed
advisors) and Pitfall 36 (being so protective of your intellectual
239
property to the point that you scare off potential customers

by requiring them to sign an NDA to even fgure out what
you do). I’m revisiting the NDA issue under the legal pitfalls
chapter simply as a reminder that you might have to have a
serious discussion with your legal counsel – or with yourself
if you are the one insisting on a top-secret “cone of silence” –
to make sure you’re not backing yourself into a corner with
either your advisors or potential customers through over-
zealous legal language in your NDA, thereby losing sight of
the balance between protecting your intellectual property and
moving forward.
Recommendations:
◾ Be careful how openly you talk about your concept in
order to keep it under wraps. But don’t make the oppo-
site mistake of developing it in a vacuum so you end
up designing something no one really wants or set up
barriers for potential customers to learn enough about
your product to make an educated evaluation of your
product.
◾ Review my suggestions under Pitfall 19 and Pitfall 36.
63. Assuming That Having Access to Additional

Data Is Always a Plus
This pitfall is related to the “Alarm Fatigue Syndrome”
(Pitfall 26). As I said there, if everything is fagged as urgent,
nothing is really urgent. Three trends in recent years have led
to the explosion of patient-specifc health information:
1. Widespread adoption of Electronic Health Records

2. The ftness device wearables craze, which generates end-
less streams of biometric patient data
3. Growth in Big Data, which makes robust consumer pro-
fles and predictions possible
Legal and Regulatory Pitfalls ◾ 241
Many people don’t realize that access to data can actually

create a liability for healthcare providers. In our highly litigious
world, it’s easy to envision a physician on a courtroom defense
stand fve years after an untoward medical event being inter-
rogated about why they didn’t detect an impending medical
crisis. “Didn’t you have ready access, Dr. Richardson, to Mrs.
Armfeld’s biometric data? Why didn’t you spot the impending
problem and intervene right away?”
No one has time to constantly monitor reams of raw data.
So, although additional data can contribute to nuanced insights
in a patient’s situation, some clinicians may prefer not to have
it at all, especially if it is presented without a reliable interpre-
tive framework.
Recommendations:
◾ Repeating what I suggested in Pitfall 26, be very judicious
with how many fags and alerts your technology sends.
As one CEO said, “Only create an alert under narrow
circumstances or the whole forest becomes an alert, and
nothing can be nuanced out that is really important.”
◾ If your product generates or reports data, allow hospi-
tals and physicians to customize their data feeds so they
receive only what they deem valuable.
◾ Be sure to provide a robust analytical framework that
helps clinicians interpret the data you are sending them.
There should be immediately identifable thresholds that
alert providers to when intervention is needed. More and
more app developers are adopting the “red/yellow/green”
color coding approach to fagging patients in need of pos-
sible intervention so clinicians can immediately spot and
address the need.
◾ As you are presenting your product, make sure you com-
municate that you know that some data is not particularly
helpful and may actually be counterproductive. Otherwise,
you run the risk of being marginalized as an “industry
outsider” who doesn’t understand providers’ legal climate.
64. Having to Comply with Strict Regulations

Regarding Selling to Physicians and Other
Clinicians
In order to minimize the likelihood of prescribers allowing
fnancial self-interest entering their care decisions, regulators
have established narrow lanes within which vendors must oper-
ate. There are strict rules about how salespeople interact with
clinicians and what they can tell them about how various drugs
can be used. All medications have defned clinical conditions for
which they can be prescribed. Some of them have other poten-
tial applications, but unless they have been cleared by the Food
and Drug Administration (FDA) for those other conditions, phar-
maceutical salespeople cannot even suggest they can be used for
those purposes. This is considered “off-label marketing.”
Provisions in the Affordable Care Act of 2010 further defne
acceptable and unacceptable activities. Vendors cannot leave
items with any tangible value, including something as simple
as a pen, but they are allowed to conduct business over a
meal.
Another important piece of legislation is the Physician
Payment Sunshine Act, designed to:
◾ Identify possible conficts of interest initiated by either the

pharmaceutical industry or the physician
◾ Make the fnancial relationships between healthcare pro-
viders and the pharmaceutical industry more transparent
to the public
All fnancial transactions between pharmaceutical representa-

tives and teaching hospitals or physicians must be tracked and
reported to the federal government.
Recommendation:
◾ Possible confict of interest is a high-visibility/high-risk
area, especially when you are dealing directly with
Legal and Regulatory Pitfalls ◾ 243
physicians. Make sure you fully understand and comply

with all relevant requirements.
65. Not Fully Understanding Human Research

Protection Protocol Requirements/FDA
Regulations/Certifcate of Need Triggers/
Licensure Regulations
I have seen vendors make the “rookie mistake” of not fully
appreciating the complexity of these regulatory require-
ments. The Offce of Human Research Protection is part of
the Department of Health and Human Services and has devel-
oped strict guidelines for all research to protect the “rights,
welfare, and wellbeing of human subjects involved in research
conducted or supported by the U.S. Department of Health
and Human Services (HHS).”1 Additionally, any research that
directly affects patients conducted in an academic medi-
cal center must comply with institutional guidelines. Beyond
research-oriented constraints, the FDA also has complicated
requirements for all medical devices. These must be met
before these devices can be offered to patients. Almost all
affected vendors learn about these early on, but they some-
times underestimate the expense and extended timelines
involved.
Because they vary from state to state, Certifcate of Need
(CON) and licensure requirements can be a bit more compli-
cated. Some states retain rather restrictive CON regulations
while others have eliminated them entirely. Similarly, facil-
ity and personnel licensure rules are state-specifc. Vendors
who sell in multiple states run the risk of appearing naïve if
they start offering a product or service in a new state without
understanding the exact requirements in that state.
I once met with a company that was proposing a service
that would expand the clinical capacity in their particular
state, which happened to be a CON state, without fully
appreciating the pushback they would get from other area pro-
viders. Because the owner’s product would address an unmet
need in an underserved community with economic challenges,
she felt she could garner enough support from local politi-
cians to ram a CON exception through the process. I told
her several times that, although support from elected offcials
wouldn’t hurt, she would have to demonstrate true need as
defned by that state’s regulations and that other providers
would certainly fght the project tooth and nail.
Recommendations:
◾ In order to maintain your reputation, before “going pub-
lic” with any product or service that bumps up against any
of these legal dynamics or regulatory requirements, make
sure you completely understand exactly what’s required.
◾ Factor generous time allowances into your planning pro-
cess if any of these regulations are likely to come into play.
End Note
1. https://www.hhs.gov/ohrp/, accessed January 7, 2019.
Chapter 15
External Political Pitfalls
With only two pitfalls, this chapter is tied with the market
misreading chapter for the fewest problems to avoid. Although
these two will probably not entrap too many vendors, you
should still consider to what extent they may affect you.
66. Possibly Running Afoul of Hyper-Vigilant

Privacy Advocates
Of all the pitfalls in this book, this is the only one I haven’t
actually seen yet, and that surprises me. By nature, I’m not
a suspicious person, a libertarian or a survivalist. But I grew
up in New York where there is a certain level of reservedness
about interacting with others. Although I was actually brought
up in a small town of about 5,000, we were close enough to
New York City and had enough relatives living there that we
typically visited the “big city” a couple of times a year. The
rule for walking the streets of Manhattan is, “Never make eye
contact.” In reality, New Yorkers can be the warmest people in
the country once they determine you’re “safe,” and I still love
getting back there. However, growing up in this climate taught
me to be a bit cautious around strangers in unknown situa-
tions. So, I “get” that we need to be careful.
245
The Internet provides plenty of opportunity to “meet”

strangers in unknown situations. I read an article about
20 years ago, just as the Internet was beginning to fully blos-
som, marveling at the willingness of many people to share
their personal information online. The writer was amazed that
many people – particularly millennials – seem surprisingly
willing to key personal data into retail websites in exchange
for a modest beneft such as a free Starbucks coffee coupon.
Again, I’m not an alarmist, but I recognize that the current
generation of 20- and 30-somethings has grown up never
knowing a time when sharing personal information was not
common.
The advent of Big Data has created unprecedented oppor-
tunities to generate surprisingly specifc guesses about indi-
viduals and their behaviors. Add to this the social media trend
of posting all kinds of very personal information and pictures
for all the world to see, and we realize that we have entered
a new world. People with less-than-honorable motives troll
for data to exploit unsuspecting victims. Feeding information
gleaned from social media sites or hacked Electronic Health
Records (EHRs) into Big Data programs can magnify the dan-
ger of this trend.
Having said all this, I wonder if we are not heading for
some kind of “tipping point” in the public’s perception of data
privacy. The incidence and size of recent data breaches and
the misuse of data has escalated in recent years. Besides mali-
cious hacker activity, some of the largest holders of personal
data have recently come under attack for allegedly misusing
data and violating their subscribers’ confdences.
Healthcare, of course, has been operating under stringent
Health Insurance Portability and Accountability Act of 1996
(HIPAA) regulations for many years now, and the public fully
understands that their Personal Health Information is to be
strictly protected. Although I haven’t seen any specifc evi-
dence of this yet, I wouldn’t be surprised if we start seeing
a signifcant uprising among privacy advocates demanding
External Political Pitfalls ◾ 247
stricter controls over data usage. Questionable activity could

sour the public on the practice of sharing data as freely as we
currently do.
What does all this have to do with healthcare? A lot. My
health and my fnancial dealings are extremely personal and
must be kept private and secure. Many argue that, because
they can contain potentially embarrassing information about
substance abuse, mental health, and other behaviors, some-
one’s health record is far more sensitive than even their fnan-
cial data. I have a relative who won’t subscribe to any of the
genetic testing services because he fears that somewhere
down the road that information could fnd its way into his
EHR or an insurance company’s database and adversely affect
his coverage.
Data is becoming the name of the game in the emerging
healthcare universe. It is the oil that lubricates the complexities
of care delivery decisions and makes the tracking of a patient’s
progress possible. As we have seen, the myriad of new smart-
phone and tablet apps is revolutionizing how care is delivered.
And the worlds of medical devices and data analytics are
quickly converging. Many devices now spin off data that can
fold into care decisions and plans. But if the culture “turns”
on this type of data collection, physicians and other provid-
ers may become somewhat less likely to want to use apps or
other technology that gathers potentially sensitive data.
Recommendation:
◾ Since this threat is still somewhat theoretical, there is not
much of a current action point. However, if you believe
this will become a greater issue, you should continue
to build in the highest levels of security protection into
your offerings and consistently communicate this to your
current and potential customers. Even if you don’t think
this issue will continue to dominate future discussions,
ramping up your privacy and security practices is still
a great idea.
67. Selling a Product That Requires Hospitals

to Share Data with Others
There are three types of programs that require providers to
share their data with outside organizations:
1. Benchmarking projects – This type of initiative provides

invaluable comparison data. The most meaningful bench-
marks come from similar hospitals in the same market. Of
course, the quid pro quo is that hospitals must give data
to get data. Some balk at the thought of letting their com-
petitors see their numbers.
Vendors sometimes try to skirt this problem by mask-
ing data in comparative projects, referring to Hospital A,
Hospital B, etc. instead of using names. Making educated
guesses about which hospital is which can be pretty
easy if any types of volume statistics are reported. Other
vendors form aggregated group averages against which
individual hospitals are compared. That way each hospital
compares its number to aggregated averages. Reluctant
participants are more likely to accept this methodology.
2. Projects where an insurance company gets to see a
healthcare organization’s data – As touchy as sharing data
with competitors is, an even more volatile proposition is
allowing payers to access hospital or physician data. With
the advent of population health initiatives, all parties in
the healthcare ecosystem are trying to fnd ways to maxi-
mize patients’ health statuses. Data – especially Big Data
where information is drawn from multiple databases –
can yield incredibly helpful insights into a patient’s health
status and how to manage it.
However, healthcare organizations are extremely suspi-
cious of payers’ motives. In their minds, the only reason
they want a healthcare organization’s data is to fnd addi-
tional ways to cut their payments. Consequently, many
healthcare organizations dig their heels in and refuse to
External Political Pitfalls ◾ 249
participate in any initiative that allows an insurance com-

pany to access their data even if it’s for improving care.
3. Capacity reporting projects – These projects can also meet
with provider resistance. Discharge planners love know-
ing in real time how many open nursing home, inpatient
rehab, psychiatric, or inpatient hospice beds are avail-
able so they can conveniently fnd the best clinical ft for
patients being discharged, but others in the organization
may not be as enthusiastic.
I once spoke with a vendor who was launching a near-
real-time project that reported open nursing home beds in
a particular market. This company was surprised that some
nursing homes resisted because they didn’t want competitors
to know how successful (or not) they were at attracting and/
or retaining patients. The institutions most likely to react this
way often perceive themselves as the market leader in their
category and fear that by providing specifc data, they are
inviting competitors to chip away at their success.
Beyond these resistance points, vendors must also recog-

nize that federal anti-trust regulations prohibit the sharing
of certain fnancial data unless strict guidelines are in place
and rigorously enforced. Do not, under any circumstances,
cross any of these lines.
Recommendations:
◾ Be prepared for provider reluctance if you are proposing a
project that involves data sharing among potential com-
petitors and especially between providers and payers.
◾ Recognize that resistance to a program requiring readily
identifable data might be a default response, especially if
it reports on capacity or patient volume. Stress the benefts
of these projects to both patients and program participants.
◾ Be sure to obtain a thorough legal review for any projects
that deal with data covered by anti-trust regulations.
Chapter 16
Internal Political Pitfalls
The reading plan presented in the introductory material identi-

fed this chapter on internal political pitfalls as one of the key
chapters. Throughout my career, I have been blessed to work
with many fne people. But human nature is such that it’s easy
for misunderstandings and mistrust to creep into even the best
of working relationships. Although people in every industry
have encountered many of these problems, these diffculties
within healthcare have their own “favor.” I hope my insights
help you circumvent these eight problems.
⭆ 68. Playing into Professional Rivalries

Top 10
Unfortunately, jealousy and potentially harmful competition

exist everywhere, including the healthcare world. Some of this
comes from overlapping areas of clinical focus or job function,
and some of it stems from individual personality clashes.
Pitfall 58 addresses the potential for technology to allow a
particular medical department to encroach on what has tradi-
tionally been another department’s “territory” and adversely
affect its revenue stream. The problem can actually be broader
than just revenue. Relative standing within an organization can
251
also come into play. Not surprisingly, the most fertile grounds
for professional rivalries among departments exist where
there is overlap in services. As indicated in Pitfall 58 internal
medicine, family medicine, and OB/GYN all offer primary
care, but with different emphases. Areas of overlap also exist
among nursing, discharge planning, care coordination, and
social work. I do not want to imply that all departments are
constantly at war with each other, but depending on how the
hospital is organized, there can be areas of disagreement.
Add to this individual personalities and personal histo-
ries, and the climate can get pretty messy. Again, I don’t wish
to malign anyone, but we all have worked in organizations
where a few people just don’t get along.
Another twist may be a potential Return on Investment
(ROI) conficts between a medical specialty area and the
hospital. The physicians may fall in love with a particular
technology that will enhance their practices and expect the
hospital to buy it. That could result in yet another demand on
the hospital’s capital budget without any offsetting marginal
revenue.
A vendor entering a conference room flled with people
representing various disciplines within the healthcare organi-
zation has no idea of the underlying psychodrama that may
be bubbling below the surface. A product that could infate
the status of one particular department at the expense of
another – or one particular executive over others – could trig-
ger resistance from those adversely affected. Of course, no
one in the room is going to acknowledge that publicly. (This
dynamic is not limited to healthcare organizations, and expe-
rienced salespeople have undoubtedly encountered this in
other settings.)
Recommendations:
◾ You should thoroughly understand the possibility that
your product could shift the relative balance of power
within a healthcare organization. Stress the beneft to the
Internal Political Pitfalls ◾ 253
organization as a whole and not necessarily to any partic-

ular department. If possible, identify your product’s poten-
tial organization-wide advantages to the areas that might
possibly perceive their role as diminishing.
◾ If at all possible, try to determine the lay of the land early
on in the sales process. Never get in the middle of institu-
tional turf battles but attempt to locate an internal advo-
cate who might be able to alert you to possible sensitivities,
especially as they relate to individual personalities. It’s
ideal if you are able to identify all the key fgures and, if
you can, meet with any potentially problematic people in
advance to hear and address their concerns. I have been
in some very uncomfortable meetings where an unsuspect-
ing vendor got ambushed by an executive carrying out a
vendetta against the “sponsoring” executive. You may not
be able to entirely defang the situation, but at least you
will have a better sense of what you might be up against
and might be able to think through in advance what to say
in case the worst happens.
⭆ 69. Threatening Someone’s Job or Stature

Top 10
within the Organization
This may be one of vendors’ most common mistakes. Here
two typical scenarios:
◾ Scenario 1 – A vendor discovers a way to capture rev-

enue that hospitals may be missing. Perhaps the vendor
has identifed a technical loophole in Medicare or other
payer provisions that the hospital is not taking advantage
of. This oversight means they are not collecting revenue
they are legitimately entitled to. I had one vendor claim
his product would help one hospital (which he named by
name) start collecting up to $4.2 million dollars a year it
was leaving on the table.
◾ Scenario 2 – A vendor presents a way to streamline

operations, thereby generating cost savings. For exam-
ple, they might have a technology-related labor-saving
approach that will reduce headcount in a particular
department.
The vendor proudly makes their case for how their product
will enhance the hospital’s fnancial position. If they are for-
tunate enough to secure a meeting with the CEO and has a
compelling story, the frst thing the CEO will do is bring in the
CFO, VP, or director with responsibility for the relevant area.
Here is how the two situations sometimes play out:
◾ Scenario 1 – Put yourself in the CFO’s position. If the

CEO calls you in to comment on the vendor’s approach,
agreeing with his assessment is tantamount to admitting
that you’re an idiot who has cost the organization hun-
dreds of thousands or even millions of dollars.
◾ Scenario 2 – In many organizations, the number of
employees within a VP’s or director’s domain is subcon-
sciously interpreted as a statement of power. Any product
that could potentially reduce signifcantly that infuence
can threaten the person’s status.
In both cases, the affected CFO, VP, or director may sense the
danger and do everything possible to discredit the potentially
damaging product. The more technical the product or service is,
the less likely that the CEO will understand the mechanics of the
operational area, giving the threatened executive more room to
obfuscate the issues and undermine the product.
Recommendations: Tread very lightly in this area. The last

thing you want to do is create an internal enemy. Here are
some strategies that may help:
◾ If your product taps into a new technology or new
insights, you can downplay the likelihood that you are
implicitly criticizing the organization or the individuals

who oversee that area. For example, before Software as a
Service (SaaS) – which provides a more economical and
effcient way to meet the organization’s IT needs – hit the
market, every enterprise hosted its own software. There was
no alternative. The frst vendors offering SaaS could legiti-
mately introduce the revolutionary approach in a blame-
free way. No one was doing it, so that fact that a particular
healthcare organization hadn’t yet adopted SaaS was no
reason for shame or blame. So, as you approach healthcare
organizations, focus on any new-to-the-market aspects of
your product to provide “cover” for internal staff.
◾ If your offering is triggered by a new development in the
overall environment, you can diffuse the implied criticism,
even if your target healthcare organization is guilty of the
same shortcoming as the rest of the industry. This scenario
sometimes develops when a regulatory body suddenly offers
an unfavorable interpretation in an ambiguous regulation,
causing the entire industry to scramble. Few CEOs would
blame a VP if the organization must reverse course because
of a newly established interpretation of a vague regulation.
Point out that the industry is just now realizing how to deal
with the problem and that the target healthcare organization
can help lead the way for others. Again, this diminishes any
implied blame.
◾ Similarly, occasionally a vendor will discover a legitimate
loophole in a regulation that no one has seen before. They
typically make the rounds to every potentially affected
organization to inform them of this new legitimate inter-
pretation. If you fnd yourself in this enviable position of
being the vendor who has discovered something big, you
can confdently approach the healthcare organization
to announce your good news without fear of threatening
anyone internally.
◾ If neither of these situations apply, do everything you
can to minimize the likelihood that someone within the
organization will feel they are being criticized. Choose

your words very carefully.
◾ Especially in cases where your product could reduce staff-
ing or operating costs, you may want to start with the exec-
utive over that area (instead of the CEO) and help them
understand they have an opportunity to be a hero within
the organization if they introduce a cost-saving innova-
tion. In other words, enlist them as an ally right from the
start.
70. Finding the Wrong Internal Champion

The immediately preceding pitfall recommends enlisting the
services of an internal champion to smooth your way. Having
someone in the know is invaluable. However, you must
attempt to assess that person’s internal stature. The healthcare
world has a defnite pecking order in terms of both clinical
clout and position within the organization.
Clinically, physicians are at the apex. But an organization’s
medical staff is not a monolithic entity. Even though a hospital
chief of staff, physician group practice president, or equivalent
leader may be the highest-level physician on the organizational
chart, they may or not have the same clout as a key admitting
physician or the head of an important department such as cardi-
ology. Chiefs of staff sometimes face some of the same resistance
executives face since some of their colleagues might consider
them one of the “suits” instead one of the “white coats.”
The next level of clinical prestige is generally the VPs of
nursing, followed by head nurses, therapists, and other clinical
technicians.
On the non-clinical side, the CEO, of course, is the pin-
nacle of decision-making. (But remember, they must answer to
the hospital’s board.) Next come other C-suite executives. By
the time you get to directors and managers, the organizational
status is signifcantly diminished.
I have seen situations where a person of relatively lower

position within an organization latches on to a product that
would greatly enhance his area’s operations. Sometimes peo-
ple at this level are overlooked or don’t get a lot of attention.
They usually appreciate the chance to introduce something
that will truly help the organization. It’s wonderful to see their
enthusiasm, but if they are not perceived as a dynamic leader,
that may not be enough to carry the day, and their lack of
clout could rub off on you. I’m not trying to be unkind, but
some organizational positions just don’t garner the same level
of respect that others do.
Beyond organizational hierarchy, the dynamic of indi-
vidual personality is the “X-Factor” that can come into play.
Even if you have gained the support of a senior executive,
unbeknownst to you, that person may be on shaky ground
and may not be long for this world. Similarly, your potential
champion may have the reputation of incompetence or being
a chronic complainer. Having such a person as your champion
does not help your case.
Recommendation:
◾ Clearly, your objective is to enlist the support of the highest-
ranking clinician or management person you can get. But
attempt to get an informal read on how respected they are
within the healthcare organization, how much infuence
they have, and who the real decision-makers are.
71. Failing to Get Strong Physician

Buy-In Right from the Start on a Clinically
Related Project
Vendors must fully understand that, when it comes to quality
of care or effciency enhancement efforts, you will get abso-
lutely nowhere without strong or even enthusiastic support
from key clinicians. And this backing must be solicited at the

very beginning of the discussions. The later physicians are
brought into the process, the less likely their support will be.
Sometimes vendors fnd an enthusiastic administrative staff
member who dives into a project and lets it progress sev-
eral levels before soliciting physician input. If a proposal is
fully or even partially “baked,” the key physicians involved
could possibly view it as something shoved at them by
administration.
There are two objections physicians often raise to quality-
or effciency-related efforts. Clinical data programs inevitably
involve comparisons of physicians, either at the departmental
or individual levels. Physicians are understandably wary of
any such evaluation since it has the potential to make them
look bad. Furthermore, this type of effort has been around
long enough that most physicians have participated in poorly
designed or implemented comparison projects. Sometimes
well-meaning analysts overstate the reliability of their method-
ology. No matter how well-thought-out a comparative effort is,
it will always have at least some inherent limitations. Poorly
designed or heavy-handed projects understandably raise clini-
cians’ ire.
A second possible resistance point relates to the very
existence of clinical Artifcial Intelligence (AI) algorithms.
Some doctors may feel they are trying to be displaced by a
computer. “You’re telling me that some machine can do a
better job than I can?” In reality, AI can provide an extremely
helpful diagnostic starting point that narrows down the range
of possible medical issues and allows the physician to apply
their experience and knowledge base as they develop the
treatment plan.
Recommendations:
◾ Recognize that it’s never too early to engage prominent
physicians in clinical initiatives.
◾ Be very humble about what your technology can and

cannot do. Nothing will torpedo a project faster than
implying that your technology offers the fnal word. No
technology is defnitive, and it should be presented as a
launching pad for further investigation and discussion.
This applies both to projects that compare clinical depart-
ments or individual physicians and to AI diagnostic or
treatment software.
72. Creating an Internal “Enemy” Whose

Mission in Life Becomes to Prevent
Your Success
This pitfall is an extension of the previous one and may seem
a bit far-fetched. However, I personally encountered this at
one of the hospital associations I worked at. Through my
relationship with a terrifc software vendor, I recognized the
opportunity to develop the frst quality comparison project in
the state. Since you can’t do a comparison project without a
robust group of relevant organizations with which to compare
yourself, this was one of those projects described in Pitfall 67
that requires broad participation and relevant peer groupings.
This was the frst large-scale quality comparison project
in the region. The feld of cross-institutional quality
studies was still in its infancy, and the algorithms that drove
this project’s comparisons were somewhat crude, largely
because they drew on administrative billing data rather than
using clinically robust data. (Pitfall 23 elaborates on the data
limitations of this type of project.) In an effort to not over-
sell the initiative, I tried to be candid about the inherent
shortcomings.
It turned out that the head quality director at a large and
infuential Cleveland hospital was a Ph.D. statistician who
personally knew and had previously worked with some of the
leading thought leaders in the clinical data feld. Due to the

unavoidable limitations with our project’s data and methodol-
ogy, he didn’t like it – at all. In fact, he felt it was downright
counter-productive. And he made it his “mission in life” to
publicly denounce the project.
I will never forget meeting in his offce where he gave me
about fve reasons why he thought the project was terrible.
After he accused me of being a snake oil salesman, he threw
me out of his offce. That’s the frst and last time that ever
happened during my career. Not one of the highlights!
In his defense, our process was less than perfect. And this
is why I included my comments in Chapter 9 about the “art” of
data interpretation where I said it’s imperative to acknowledge
the limitations of your data and methodology and not come
across as if your results are magically accurate.
My response to my critic’s charges was that this project
was designed to identify possible problem areas that warrant
further discussion. The point is that, if there are potentially
thousands of areas to investigate based on the patient’s sever-
ity of illness, which specifc procedures were done, which
physicians were involved, and many other factors, it makes
sense to focus efforts on the combinations that appear most
out of line. As I was introducing this project to various hospi-
tals, I repeatedly told them that no one should be promoted
or fred based on these reports’ results. They are not that
laser-focused.
I’m happy to report that, despite my friend’s best effort,
the project did launch – without his hospital of course – and
was subsequently recognized as an important step forward for
hospitals in the region.
Although encountering such a harsh antagonist is rare,
there is still a fair degree of hostility to some types of data
projects and technologies. During the June 2016 American
Medical Association annual meeting, Dr. James Madara,
the organization’s CEO, charged the digital health industry
with promoting devices and applications that “impede care,
confuse patients, and waste our time…. This is the digital

snake oil of the early 21st century.”1 Where have I heard
the charge of “snake oil” before? Dr. Madara also refer-
enced ineffective Electronic Health Records (EHRs), direct-
to-consumer digital health products, and apps of “mixed
quality.”2
So, this issue is alive and well. And it harkens back to my
comments under Pitfalls 9 and 10 about the need to have
scientifcally backed clinical data and/or credible clinicians
as part of your product development team. Having that type
of trusted backing may help counter some of the backlash
expressed in Dr. Madara’s comments.
Recommendations:
◾ If you have a product that could potentially invoke the
wrath of a clinician, work with your internal clini-
cal advisers to identify the specific points of potential
objection and think through credible responses. Never
dismiss them as irrelevant. Even if your antagonist is
dead wrong – which they probably are not – just hav-
ing a prominent critic verbalize objections could be
enough to destroy your initiative. Whenever controversy
surrounds a project, many people – especially those
who may have limited technical understanding of the
issues – choose to walk away rather than wade into the
murky waters.
◾ Be very humble about your data project. Avoid any
language that sounds like you can defnitively identify
or solve problems. You don’t have to be apologetic about
your offering, but it is usually best to preface any type
of detailed presentation with an acknowledgment of its
limitations. That way, if a critic emerges, you can agree
that he has correctly assessed the situation and point
back to your earlier comments that were consistent with
his point. This will go a long way toward maintaining
your credibility.
73. Losing a Sale Because an Incumbent

Vendor Claims They Can Do the Same Thing,
or Your Innovative Approach Teaches Them
How to Do It Themselves
This one provides a “double-whammy.” You could lose a
potential sale to an existing vendor who somewhat falsely
claims they can do what you do, or you could inspire them to
copy your great new idea. Either way, you lose.
There’s an old sentiment that states you will never fnd a
consultant who admits they can’t solve your problem. (For the
record, I do turn down engagements when I don’t feel I can
do an excellent job.) This saying can also be true of technol-
ogy vendors.
If you have an innovative take on a recognized problem,
it’s possible that there are other vendors who may be trying
to address the same issue, but perhaps you are using a dif-
ferent approach. Technology is often confusing to executives
who don’t necessarily use it every day. So, if the executive
tells an incumbent vendor that your company approached
them with an allegedly superior product, the vendor will,
naturally, try to retain them as a client. It may be diffcult
for the executive to ascertain whether their existing vendor
can, indeed, effectively tackle the problem you are proposing
to solve.
Another factor is that, if the existing vendor is doing a good
job for your target healthcare organization, the loyalty factor
will make it harder for you to displace them.
A variation on this problem is where the end-user explains
your new approach to their current vendor who then decides
you have a great idea and tells the client they’ll be happy
to develop the same thing for them. Besides losing revenue,
you’ve essentially inspired a competitor to mimic your work.
To make matters worse, you may discover that an incum-
bent vendor may have actually inserted a right of frst refusal
clause into their client contract. I once had this very thing
happen to me. I managed the data function for my organiza-
tion. My department was responsible to collect and process
the data, and then we handed it off to a peer senior executive
who used the data my area produced to feed into one of his
projects. When it came to renew our data vendor’s contract,
the company wanted to insert a right of frst refusal clause for
essentially any future data-related project.
I had no problem with that concept for conventional or
existing types of data projects where there are already several
companies to choose from. But there are many innovative
data and analytics companies that steadily introduce brand
new approaches and methodologies. If one of those compa-
nies approached me with an awesome new idea that no one
else had thought of yet, I didn’t want to feel constrained to
go to our current supplier to essentially “ask their permission”
to work with someone else who had the foresight to create a
dynamic new product. Let me remind you that many vendors’
default is to claim they can do anything, so the chance of
them declining was pretty small.
Complying with this step would also prolong the time-
line for acquiring a new technology. The current company
would have to take time to evaluate whether or not they could
really replicate the technology, and then if they decided they
could, it would take them many months of development time.
Furthermore, giving them the inside track could potentially
hinder our ability to negotiate favorable terms if they came
back with an offer to develop the product for us. They could
claim to replicate the other vendor’s product, but the price
could be twice as high. So, this concept of right of frst refusal
was a terrible idea all around.
Unfortunately, my colleague thought he knew more about
data and technology then he really did, and he absolutely
insisted in bowing to our incumbent’s requirement for tak-
ing a frst shot at anything new. About a year later, after I had
seen an innovative take on a pesky problem, I was forced
to abide by this clause and asked our existing data vendor

if they could replicate the idea I had seen elsewhere. They
naturally wanted to take a crack at it and spent four months
looking into the concept before they fnally recognized they
couldn’t deliver what we wanted. We lost valuable time, and
it was all I could do to keep from telling my internal peer,
“I told you so.”
Recommendations:
◾ If you fnd yourself trying to displace an existing vendor,
recognize that the momentum is not in your favor. This
dynamic holds true any time you try to change vendors,
whether you are selling a technology product, banking
services, or any other item. Since many business decisions
are based largely on relationships, the existing supplier
may have strong personnel connections with on the orga-
nization’s executives or board members, making your task
all-the-more diffcult.
It’s disruptive for the client to yank out one technology
or product and replace it with yours. At a minimum, staff
will have to be retrained, and it’s entirely possible that
work processes may have to be adjusted. You have to make
it worth a client’s while to do so. If your product pretty
much replicates what the other vendor’s does, you may be
able to stand apart through either enhanced features or
functionality, superior customer service, and/or favorable
pricing.
◾ If you happen to run into a right of frst refusal situa-
tion, get a thorough understanding of exactly what the
current company does. Your objective is to demonstrate
to your potential client that your approach is differ-
ent enough from what the other vendor does that it falls
outside the right of frst refusal requirement. Of course,
whether or not it does may be a matter of degrees,
and the fnal outcome depends on the exact contract
language.
74. Losing Out Because the Organization

Prefers a Single Source Vendor
The battle between Single Source vs. Best-of-Breed installations
has raged on for decades. According to a blog posted on www.
binarystream.com,3 Single Source can work well in smaller orga-
nizations with relatively simple needs or very large organizations
that are strong in a particular vertical. Twenty years ago, Single
Source vendors could credibly claim the advantage of easier
integration over a patch-worked Best-of-Breed hodge podge.
However, Binary Stream argues that the current marketplace
offers integration tools that have made this less of an issue. The
biggest weakness of Single Source systems is that they almost
never offer the absolute best application for everything they offer.
Best-of-Breed works best where maximum performance
is essential in complex, fnancial, or competitive markets.
“Progressive IT departments where system change is not feared
or considered as risk averse is another essential success factor in
implementing Best-of-Breed solutions,”4 according to BinaryStream.
These vendors claim with some credibility that, since they are
literally on the leading or even bleeding edge, the Single Source
vendors with whom they compete must play catch up.
Although most experts lean one way or the other, there is
no clear consensus within the user community. The “right”
answer depends on the organization’s needs and the prefer-
ences of its IT professionals.
Typically, entrepreneurs offering disruptive products fall
into the Best-of-Breed camp. This can be challenging if you
are targeting a Single Source-leaning organization.
Recommendation:
◾ If you are up against an organization that clearly prefers
Single Source, there is little you can do beyond stressing
the advantages of your product and the possible opportu-
nity costs of going with a suboptimal product. Quantifying
opportunity costs can sometimes carry the day.5
75. Facing a Very Cautious Decision-Maker

or Purchasing Agent Who May Be “Technophobic”
or Prefers a “Safe” Option over an Untested,
Innovative One
As I mentioned in Chapter 4, everyone agrees that health-
care is about a decade behind other industries when it
comes to embracing technology. The industry’s complex
environment means multiple interests must support any sig-
nifcant decisions, and project failure is often swiftly pun-
ished. This dynamic makes some executives highly cautious,
and the problem is amplifed when they feel intimidated by
technology.
About two years, I was at a professional conference in
Chicago where I ran into an old colleague I used to work with
in Michigan years ago. When I explained that many of my cli-
ents are developers and entrepreneurs who are trying to intro-
duce technology innovations into healthcare, he commented,
“Good luck with that. They wouldn’t get very far with me. I’ve
worked in hospital operations for over 30 years and have been
able to avoid technology the whole time. If I can keep it that
way until I retire, I’ll be a happy man.” Not everyone feels this
way, but at least some do.
One of my earliest blogs was entitled, “Would You Rather
Manage a Nuclear Power Plant or Buy Healthcare Technology?”
You might be wondering what kind of choice that is. What
could those two things possibly have in common?
Think about the nuclear power plant situation. Even though
someone might be a highly intelligent leader, unless they have
worked in the nuclear energy feld, what could they possibly
know about the technical aspects of the nuclear power indus-
try? They are completely dependent on their technical advi-
sors’ recommendations.
What if the experts are wrong when they say the early
warning alarm system in Reactor 2 is just fne? Whose head
would roll if a failed alarm resulted in a nuclear incident? Or

what is the technical experts’ real motive for seeking a 30%
budget increase? Is it a genuine fear of avoiding technologi-
cal obsolescence, or is it to expand their own power base?
It can be hard for the uninformed executive to tell what the
real spending priorities should be. Of course, they can seek
input from multiple outside sources, but all that informa-
tion is still second-hand, and this makes the situation a bit
unsettling.
These feelings of uncertainty often parallel the stomach-
churning experienced by healthcare leaders thrust into
medical technology or healthcare IT, some of which may be
untested. There are four reasons for this:
1. As with nuclear plants, many executives know little

about the nuts and bolts of healthtech. Even if they are
fairly comfortable with it, tech is such an ever-changing
world that what they knew a year ago is probably
obsolete today. So, as they are being asked to manage
something they don’t really “get,” they can’t turn to their
personal experience base but have to rely on technical
experts.
2. They have seen technology – even technology released
from major companies – fop spectacularly. I referenced
Apple’s dismal launch of its revised Maps app in 2012
under Pitfall 1. Someone who is slightly nervous about
technology will correctly reason that if a company as
huge and progressive as Apple can botch a roll-out, how
do they know they won’t suffer the same fate?
3. There’s a good chance they have personally been burned
by a major technology fail, through either incompetent
installations, unfulflled promises, or major cost overruns.
4. Maybe, just maybe, they know a CEO or other senior exec-
utive who literally lost their job because of a bungled EHR
implementation or other major technology project disaster.
Add to this the knowledge described in Pitfall 72 above that

some in the medical feld consider much of the newer technol-
ogy being launched “snake oil,” and you have very reluctant
and cautious decision-makers. Who wants to have their name
on the snake oil purchase order? Many executives are much
more comfortable with taking the safe route, and their operat-
ing philosophy appears to be: No one ever got fred for buying
an IBM computer.
The following table presents a helpful mental framework for
assessing the likelihood of a particular healthcare organization
coming on board. In a classic 2 × 2 analysis (as shown below),
one dimension is the organization’s fnancial position and the
other is the leadership’s degree of enthusiasm for technology.
Financially Resource-rich with

Enthusiastic
challenged with enthusiastic

enthusiastic leadership
Leadership
leadership
Financially Resource-rich with

challenged reluctant leadership
Reluctant
with reluctant
leadership
Challenged Resource-rich
Financial Condition
You clearly want to identify organizations in the upper right

quadrant, and you can pretty much write off healthcare orga-
nizations in the lower left box.
Recommendations:
◾ If you regularly show senior executives or clinicians the
virtues of your technology, don’t be surprised if some of
them treat you like the ex-spouse they accidently bump
into on a family vacation. You can’t change people’s
apprehensions, so think through ways to put them at ease
and build your credibility.
◾ Do what you can to minimize their feelings of intimida-

tion. Leave the technical jargon home. Explain your prod-
uct in language mortal humans can understand.
◾ Don’t join the ranks of vendors who overpromise and
under-deliver. Be upbeat but realistic about what your
product can and can’t do. And be honest about installa-
tion and timeline challenges. Vendors love to talk about
“long-term partnerships.” It’s hard to consider someone a
partner once they have shown themselves to be unreliable
just to make a sale.
End Notes
1. “Is Health IT really ‘digital snake oil?’ 8 leaders react to
Dr. James Madera’s speech,” Beckers’ Health IT 7 CIO Report,
June 23, 2016.
2. ibid.
3. Aidan McCrea, “The Advantages and Disadvantages of
Single Source vs. Best-of-Breed,” www.binarystream.com,
December 25, 2018, accessed January 11, 2019.
4. ibid.
5. Ibid.
Chapter 17
Organizational/
Operational Pitfalls
The healthcare delivery world has reached an uneasy opera-

tional equilibrium where the thousands of moving parts have
settled into temporary stability. You may be familiar with
the game Jenga where players progressively remove wooden
blocks from a tower of 54 blocks and move them to the top of
the structure, making it increasingly unstable. The last person
to successfully remove and relocate a block before the tower
collapses wins the game.
Introducing change into a healthcare delivery system can
require the same level of dexterity as playing Jenga, and here
are some mistakes you must avoid as you try to do so.
⭆
Top 10
76. Not Recognizing the High Threshold
Required for Decisions and Action due
to Organizational Complexities
Management expert Peter Drucker has called hospitals “the
most complex human organization ever devised.”1 People who
have never worked in this climate cannot fully appreciate
271
the truth of his statement. As I described in Chapter 1, the

range of variation among different hospitals and health sys-
tems is huge. Generally, the larger the healthcare organiza-
tion, the more complex it is. But even the smallest Critical
Access Hospitals have various decision-making layers, includ-
ing numerous executive, clinical and operational departments,
committees, and boards.
If you are trying to sell a product targeting frontline end-
users, you must frst sell them on its usefulness. If the product
touches on clinical care, you must obtain the blessing of physi-
cians, nurses, therapists, or others in the patient care area. (See
Pitfall 71 about needing to get physician support as early in
the process as possible.)
Assuming executive leadership has not been engaged up
to this point. The next step is for you and the internal people
who support the product to convince them of its worth. If
the product involves a large fnancial commitment, it must be
folded into the subsequent year’s budget and may even have
to get board approval if it exceeds a certain dollar threshold.
(See Pitfall 52.) And if you miss the budget cut-off date, you
will have to wait an entire budget cycle before the project
can gain approval. I’ve talked with several experienced sales
executives who say that government is the only other sector
with as long a sales timeline as healthcare.
And things happen along the way. More than one client
has “spun” the following tale of woe: “It looked like we were
all set to go, but then at the last minute the ___________ (fll
in the blank) department stepped in and mucked everything
up.” This blank has been populated by the legal, compliance,
human resources, and many other departments. One of my
clients told me that even though he and his client hospital had
agreed to terms in a straightforward, four-page agreement, the
legal department jumped in – almost at the moment he had
his hand poised above the agreement to sign it – and started
a lengthy process that lasted months and resulted in a bloated,
ten-page contract. Another client told me that the compliance
Organizational/Operational Pitfalls ◾ 273
department from the targeted healthcare system swooped in at

the last minute and scuttled the entire project.
This complexity within healthcare organizations can add
layers and possibly months to the approval process.
Recommendation:
◾ Be sure you factor this reality into your internal sales pro-
jections and as you plan your cash fow needs. You need
to have a long fnancial runway. See Pitfall 51 for further
advice on sales projections.
⭆ 77. Underestimating the Complexity

Top 10
of Streamlining a Process or Changing
Procedures, Especially If It Creates
Additional Workload Requirements
for Some Departments or Individuals
Don’t underestimate the power of resistance to change. Of
course, this problem exists in every organization and industry,
but it takes on its own unique shape in the healthcare world,
primarily because of its incredible complexity as described in
the preceding pitfall.
One factor in healthcare is the tenuous “balance of power”
within the organization, as highlighted in Pitfall 68. As I stated
there, any operational change can potentially increase one
department’s infuence within the organization and generate
resistance from others. Change invites controversy.
This problem can be exacerbated if the change requires
others to do additional work. Even if the new process is a
net positive to the overall organization, those people whose
workload is adversely affected often make their displea-
sure known. The increasing fnancial pressure on healthcare
organizations over the last few decades has forced them to
dramatically streamline operations while trying to maintain
and even improve quality of care. Adding workload expecta-

tions in a climate that is often stretched to the max is seldom
appreciated.
Some technology – particularly software programs – can
make life easier for a particular department but have a spill-
over effect on other areas that might have to modify their
operations or pick up extra responsibilities. Although the
department that primarily benefts from the software may
be very happy with the new operating state of affairs, others
might not be so thrilled.
We saw this at one association I worked at when we
adopted our member contact management software program a
number of years ago. It brought a needed level of structure to
our member relations function but required absolutely every-
one in the organization to change some of their day-to-day
activities. Since this was mandated from the top down, there
wasn’t much resistance (although there was a bit of grum-
bling). But had this been initiated by just one department
resulting in everyone else having to comply with new operat-
ing procedures, I suspect there would have been considerable
pushback.
This scenario is played out in every healthcare organiza-
tion whenever a new way of doing things is introduced, and
changes can be all-the-harder if they involve a steep learning
curve. The old cliché about the diffculty of turning a battle-
ship around aptly describes the effort needed to get a health-
care organization to change.
Recommendations:
◾ If you are newer to the healthcare market and are just
now starting to sell your product, you may not fully appre-
ciate the operational impact your approach may have on a
healthcare organization. Soliciting input from the “ friend-
lies” in your pilots or frst clients can be especially helpful.
◾ Do all you can to paint a realistic picture of what adopt-
ing your product or service will mean to the healthcare
organization. You are the expert on your own technol-

ogy, and you have the deepest understanding the positive
impact it can have. However, every healthcare organiza-
tion is unique and has its own quirks. Just because one
institution embraces your product, it doesn’t mean the
next one will. Unless you have real-time knowledge about
all the jots and tittles of operations within the areas likely
to be affected in any given organization and have a good
grasp on how to minimize the disruption, you could be
walking into a buzz saw.
◾ Work with your “internal champions,” getting them to help
you think through possible resistance points and identify
the individuals most likely to react negatively. You should
meet with potential critics early on to invite them to help
you think through what an optimal implementation might
look like.
◾ Be humble about your solution. Never let the words, “All
you have to do is . . . .” pass your lips. You will imme-
diately be branded as naïve, and you will have to work
hard to re-establish your reputation. Avoid absolute state-
ments or implied promises. Remember, some potential
clients may not achieve results as dramatic as your demo
slides probably project. If, for example, your product could
potentially generate FTE reductions, it’s possible the health
system has already implemented a project that has helped
them move part-way toward that goal. Therefore, your
chance to reap the low-hanging fruit may not be there, so
be careful about over-promising results. Use phrases like,
“typically,” “in most cases,” and “we’ve seen that many
hospitals . . .” If they end up buying your product, this will
help keep expectations in check and make it easier for
the healthcare organization to view you as a long-term
partner instead of someone who sold them something that
didn’t really work that well. As one CEO put it, “approach-
ing the C-suite with more humility than bravado is often
the better way to go.”
◾ Don’t assume that your product or approach will solve

all the system’s problems. Yours will probably not be the
company that fnally whips the healthcare world into
shape. It’s best to ask a lot of questions to determine if
there is an alignment between the organization’s needs
and your offering. If there isn’t, it’s to your advantage to
acknowledge that and point them toward a better-suited
approach if you know of one. It’s better to establish a
relationship with future potential than to try jamming
a square peg into a round hole and sacrifcing both the
current customer and other like-minded potential cli-
ents who might hear that your product wasn’t all it
was cracked up to be.
78. Trying to Sell to a Hospital That Insists

on Having All Technology Products or Services
Referred to IT (Even If It Isn’t Directly Related
to IT), Resulting in the Project Being Buried
under Multiple Other IT Priorities
The CIO has ultimate operational responsibility to assure
smooth IT operations and maximize data security. Having
their blessing can be essential, and earning their opposition
can be fatal.
Many executives – especially those who are not particularly
comfortable with technology – immediately call in the CIO
whenever they hear about any project that even smells like
technology. This is entirely appropriate. However, many tech-
nologies operate with little interface with the organization’s IT
infrastructure. Examples include point-of-care testing devices,
freestanding endoscopes and ultrasound units, audiometers,
bladder scanners, and many other clinical and medical devices.
Most IT departments are severely overworked, and their
project lists include dozens and dozens of tasks. Landing at
the end of the queue can greatly extend the evaluation and
decision-making processes. Several technology vendors have
told me they do all they can to avoid getting caught up in the
IT department quagmire, not because they are trying to dis-
respect the CIO but because they recognize their product has
virtually no effect on the organization’s technical infrastructure
and they don’t want to add months to the decision-making
process.
Recommendation:
◾ Fully respect the CIO’s and the IT department’s roles and
avoid getting on their wrong side at all costs. However, if
your product has minimal impact on existing technologies,
try to steer the evaluation process away from IT. This will
undoubtedly speed the process up, and IT will probably
appreciate not having to add yet another project to their
long task list.
79. Having to Comply with a Hospital’s

Requirement That All Vendors Subscribe
to a Vendor Clearinghouse before It Will
Allow a Presentation
Healthcare accreditation organizations like the Joint Commission
and DNV GL Healthcare require provider organizations to know
who is entering their facilities and for what purposes. This
requirement applies to all vendors. Among the items tracked are
whether a vendor has any criminal or federal sanctions against
it or is on a government watch list. Additionally, healthcare
organizations often add specifc health requirements like yearly
infuenza vaccinations, tuberculosis skin tests, or other types of
vaccinations for the individuals themselves.
In order to manage and document these reporting require-
ments, many hospitals make all outside representatives register
with credentialing companies like Vendormate, Symplr, and

others. These organizations conduct the necessary back-
ground, fnancial, and compliance checks and create online
repositories that ensure up-to-date credentialing documen-
tation so representatives are not denied access because of
incomplete or inaccurate information. The credentialing com-
panies often offer dashboards to track which vendor reps fully
comply and which do not.
As inconvenient as it may seem to have to register with
one of these credentialing companies, it’s an unavoidable
reality if you want to do business with the healthcare
organizations that subscribe to their services. Many vendors
and contractors new to the healthcare market are unaware
of this requirement.
Recommendation:
◾ If you plan to target many healthcare organizations, there
is a good chance that at least some of them will work with
one of the credentialing companies, so reach out to one of
these organizations so you won’t be turned away from a
potential client’s campus.
80. Encountering an Organization That Prefers

to Develop Its Own Technology In-House
Instead of Seeking Outside Solutions.
About 20 years ago, many healthcare organizations that
saw the growing potential of technology felt energized to
develop their own customized computer programs to tai-
lor solutions to their particular needs. Because clinical and
management software programs were still in their early
stages, some healthcare organization concluded that no
program fully met their requirements. Consequently, they
decided to design their own.
Four more recent factors have taken some of the steam out
of this trend:
1. Technology vendors have greatly upped their games,

and commercially available solutions are far more robust.
Many vendors now have the resources necessary to con-
duct the underlying research and advanced programming
required to develop state-of-the-art programs.
2. The demands on hospitals’ IT departments have grown
considerably as the roles of data, IT, and technology have
exploded. Furthermore, fnancial pressures have forced
providers to evaluate every FTE position. This means
provider IT departments have less and less fexibility to
develop new offerings.
3. Software as a Service (SaaS) delivery of software has
made the process of updating programs from external
vendors far simpler than it used to be.
4. Those provider organizations that developed their own
solutions have had frst-hand experience with the chal-
lenge of continuously having to update programs and
applications. Creating software in the frst place is a
monumental effort, but the task doesn’t end on release
day. There are inevitably bugs to fx and enhancements
to offer. These are never-ending tasks, and experiencing
the reality of these demands has caused some healthcare
organization would-be IT developers to back away from
the “grow your own” strategy.
This means that the desire to do in-house development has

subsided a bit, which increases the opportunity for outside com-
panies to fulfll their needs. However, you may still encounter a
few organizations that prefer to do things internally.
Recommendations:
◾ If you run into healthcare organizations that want to do
their own in-house development, gently remind them of
the challenges of creating and maintaining self-developed

solutions.
◾ If your company has the capacity to do so, you can offer
to tweak your offering to maximize its utility to prospective
clients. This customization would allow you to meet their
needs and remove the reason for them to take the process
in-house. Just be sure to keep it as affordable as possible.
81. Encountering Internal End-Users’

“Bandwidth” Issues
Physicians, nurses, technicians, other clinical personnel, and
executives live busy and hectic professional lives. By now
you should agree that the healthcare delivery environment is
extremely complex, and, if anything, demands on individuals’
time are increasing.
All new technology involves a learning curve, and harried
people are not always enthusiastic about interrupting their
routines to take on yet another new application. Given the
onslaught of new technology being introduced into both
the clinical and business sides of healthcare, this could be
a fairly signifcant deterrent. Fortunately, software and app
developers are gravitating toward informal industry practices
about how apps look, feel, and operate. So, even if users are
new to a particular app, they can often fgure it out pretty
easily.
However, there are only so many programs and apps
people are willing to utilize, and the problem is made worse if
what you are trying to introduce is not likely to be used a lot.
End-users may conclude that adopting to the new technology
isn’t worth the effort it takes to learn if it only comes into play
occasionally.
When I worked at Georgia Hospital Association, one of
the jokes was that none of the executives knew how to do
anything on our mega-copier except make single copies. And
forget about us trying to fx a paper jam. When this happened,

our solution was simple: Call one of the support staff. The
reason for our ineptitude was that we almost never had to use
any of the advanced features or fx a paper jam, and because
doing any of those things was fairly complicated, we didn’t
perform those functions often enough to really internalize the
processes. So, anticipated low-volume rates for a new technol-
ogy can breed indifference or even hostility.
This phenomenon is not unique to healthcare. Every orga-
nization is potentially susceptible to this problem. However,
there is a major factor within the healthcare environment that
makes the situation even more challenging because it sucks up
considerable end-user bandwidth. That’s the Electronic Health
Record (EHR). It’s well-known that many physicians and other
clinicians detest EHRs, and some who are nearing retirement
age have decided to leave early rather than have to embrace
EHRs.
Modern Healthcare magazine recently ran a humorous
piece in its “Outliers” back page feature spotlighting a satiri-
cal Twitter account called “EpicParodyEMR.” (Epic is a leading
EHR supplier.) Here are some tweets:
◾ “Myth: Our Epic design team stays up late at night think-

ing of ways to torture you and make your life harder.
Fact: They actually go to bed pretty early.”
◾ “The Epic Help Desk: Helping you adjust to us.”
◾ EPIC is an acronym for “Exasperating Physicians
Inhibiting Care”2
There is not a single clinician on the planet who decided

to enter the feld of medicine so they could play with EHRs
all day. For many, the emotional bandwidth required to use
EHRs has sucked the life out of any desire to adopt yet more
technology.
The bottom line is that the perceived benefts of a new
technology must exceed the perceived “cost” of learning yet
another program, and many in the healthcare world may need

extra convincing.
Recommendations:
◾ If your technology has a mainstream-type look and feel,
you can showcase the familiarity of its fow with poten-
tial clients to help reduce their resistance to learning yet
another new tool.
◾ If a particular use case is apt to be low volume, there’s not
much you can do to change that. Stress the value your
product brings to their issues. Like anything else, even if a
particular solution disrupts a workfow or requires some
extra effort, people will generally use it if they see it as a
net positive.
82. Encountering Patients’ “Bandwidth”

Limitations
Clinicians aren’t the only ones with limits on how much
technology they can handle. Patients can have the same issue.
Three factors contribute to this:
1. Patients’ level of technology literacy – Even though mil-

lennials love technology, many in the Greatest Generation
and Baby Boomer demographic groups do not. Many are
intimidated by technology, and some even seem to take
pride in the fact that they don’t understand computers.
Fortunately, this group is shrinking as software is becom-
ing more user-friendly.
2. Patients feeling overwhelmed by the number of different
technologies they are asked to use – If they have several
physicians or other caregivers, each with their own por-
tals, they may resist having to master several portals, web-
sites, and kiosk technologies in addition to having to track
the many passwords involved.
3. Just like the clinicians and executives referenced imme-

diately above under Pitfall 81, patients may be infrequent
users, especially if they are asked to interact with several
portals and websites.
Patient-facing apps are typically purchased by healthcare

organizations so their patients can use them. Your contacts in
the healthcare organization may be well-aware of the reasons
some of their patients may not gravitate toward using addi-
tional technology. As a result, they may be hesitant to move
forward.
Recommendation:
◾ As discussed under the preceding pitfall about hospital
personnel who are asked to use various technologies, make
sure your technology has as much of an “industry stan-
dard feel” as possible, and stress the value of your product
to both the patient and the healthcare organization depart-
ments with which they interact.
83. Suffering Because of Sub-Optimal

Implementation of Previous Technologies,
Leading to General Skepticism about
Technology or, If the Prior Technology
Is from Your Own Company, Your Reduced
Credibility Which Undercuts Renewals,
Cross-Sell Opportunities and Strong
References
Some over-zealous healthtech sales executives overlook the
need to thoroughly understand the adequacy – or lack thereof –
of internal operational processes before slapping in a new soft-
ware program. At its core, much of technology is merely a tool
to greatly streamline or accelerate a certain process or analysis.
If the core activity is a well-oiled machine, automating it can

signifcantly enhance productivity. But if, on the other hand,
the underlying systems are fawed, all you’ve done is helped
the fawed way of doing things become more effcient at being
fawed. Technology can’t fx a practice that is fundamentally
defective.
Your objective should be to work with your potential client
to document their current approach and determine where it is
breaking down. This can be a lengthy undertaking that may
take many weeks and involve numerous committee meetings.
Only after both you and the client fully grasp the extent of the
baseline problems can you determine the best way to deploy
your solution.
I discussed technophobia under Pitfall 75. People who resist
technology may have gotten there largely because of previ-
ous frustrations with other programs or hardware. This makes
them reluctant to try yet another new program. The situation
is made worse if you happen to work for the same company
that sold a previous installation to the same customer and the
results were judged to be subpar.
Recommendations:
◾ See the recommendations under Pitfall 75 about techno-
phobic users.
◾ If the previous less-than-ideal installation was from a
different vendor, you can contrast their implementation
process and yours.
◾ If your company is to blame, own your responsibil-
ity and extend some kind of free service or concession
to help mend a bridge that would have otherwise been
burned. Furthermore, you can highlight the improve-
ments your company has made since their previous
experience.
◾ A strong users’ group should be central to your prod-
uct support strategy. A users’ group provides several
advantages:
– It helps make sure your clients will take fullest advan-

tage of your product, thereby maximizing their
satisfaction.
– It fosters cross-pollination of ideas and recommen-
dations among peer organizations. This further
cements your product as a valued asset for each user
organization.
– It alerts you to user concerns long before renewal time,
allowing you to take corrective action.
– It helps develop esprit-de-corps within a cadre of happy
users, greatly boosting your credibility and maximizing
the chances of contract renewals.
– Feedback from your clients fows into the product
improvement process, making your offering better for
your entire client base.
– It can support cross-sell opportunities if your company
has other products.
84. Encountering Things Beyond Your Control

We all know that bad things happen. A potential client suffers
an unexpected fnancial setback. Your “internal champion”
suddenly falls from grace or leaves the organization. New lead-
ership comes in and changes strategic direction. A sale is lost
because it turns out the son-in-law of the highest admitting
orthopedic surgeon works for a competing vendor. More than
one of my clients has run into this type of problem.
Recommendation:
◾ Unfortunately, there is little you can do when this happens.
Pick yourself up and move on. Although you will under-
standably be disappointed, keep the door open and don’t
do anything to burn bridges. You never know when things
might open up again. And never express anger or bad-
mouth the organization to others.
End Notes
1. Rick Pollack, “How hospitals are redesigning care delivery to
serve changing needs,” Modern Healthcare. September 26,
2015, accessed March 3, 2019.
2. “Epic trolling,” Modern Healthcare, April 1, 2019, page 44.
Final Thoughts
We’ve come a long way. I tried in the frst part of this book to
do three things:
1. Orient you to some of the healthcare feld’s unusual

challenges
2. Suggest some common-sense approaches to make things
better
3. Spotlight the incredibly exciting breakthroughs and
opportunities healthtech offers
The frst two chapters highlight problems, and the entire

second part of the book focuses on diffculties you may face
as you interact with healthcare organizations. In order to not
overwhelm you, I tried in every case to provide practical sug-
gestions for circumventing potential problems. Many of them
can be minimized or even eliminated with careful forethought
and planning.
I am very glad I had the opportunity to circulate the vari-
ous chapters to more than two dozen respected industry col-
leagues for their input and suggestions. That took this book
from being just the opinions of one person sitting behind his
laptop to representing a consensus of industry leaders. I don’t
want to imply that every healthcare executive or clinician who
reviewed parts of this book endorses every idea in it. I take
287
responsibility for the content, but you can know that these are
sound suggestions that refect the wisdom of people who col-
lectively represent hundreds and hundreds of years of industry
experience.
In case you are slightly overwhelmed or even depressed by
some of what you’ve read, let me remind you that the health-
tech feld is at an unprecedented point of dynamic expansion.
I suggest you go back to Chapter 4 and re-read the section
called “Explosive Growth” to remind yourself about the incred-
ible opportunity this feld offers.
Congratulations on choosing to join the healthtech industry.
I trust some of the ideas in this book will help you navigate
through the challenges and inspire you succeed in bringing
revolutionary products to the market with the end of changing
patients’ lives.
Index
Note: Locators in italics represent inpatient, 48–49, 100, 201, 219

fgures and bold indicate tables in Medicare payment for, 34
the text. number of, 231
physicians splitting, 140
2 × 2 analysis, mental framework, Advisory board, 116, 133–136
268, 268 Aetna, 9
3-D printing, 83 Affordable Care Act of 2010 (ACA)
4G technology, 75 acceptable and unacceptable
5G technology, 75 activities, 242
7 Ps of marketing, 187 coverage for adult children, 54
21st Century Cure Act, 80 expansion of preventive
services, 50
A not providing universal
healthcare coverage, 5
Abuse, 36 provisions of, 10
laws, 32–33 uninsured, 16
substance, 247 Age of data, 147–150
ACA. See Affordable Care Act of Aggressive medical coder, 34
2010 (ACA) AI. See Artifcial intelligence (AI)
Academic medical center (AMC), 2, Airports compared with hospitals, 3
106, 140, 243 Alarm Fatigue Syndrome, 152–153,
Academic research, 2 See also Data access
Accountable care organization Allscripts, 152
(ACO), 4 Amazon, 77, 78
Acquired skill, 136 AMC. See Academic medical center
Acquisitions, 159, 196, 214, 220 (AMC)
Active Wellness, 79 American College of Healthcare
Additional insurance, 214–215 Executives (ACHE), 169
Admission, See also Hospital American Hospital Association, 2,
admissions 10, 17, 32
289
290 ◾ Index
Analyses/analysis Assessment, 31, 120, 254

comparing state law and judicial Assets, 228
case requirements, 31 Association vs. causality, 116–119
database, 229 Audit of inpatient cases, 33–37
existing internal policies, 31 Automating clinical tasks, 90–91
of healthcare projects, 145 Automobile, 78
individual market, 228
market, 156 B
parallel, 22
sample size, 146 Bad data, 145, See also Data
software-driven, 229–230 Balanced Budget Act (BBA), 11
Analytical framework, 146, 153, 241 Balance of power, 273
Ancient Rome, spread of plagues Bankruptcies, 54
in, 163 BBA. See Balanced Budget Act
Anecdotal support, clinical product (BBA)
offering through, 114–115 Becker’s Health IT & CIO Review, 32
Anthem, 9 Becker’s Hospital CFO Report, 19
Anti-fraud regulations, 33 Beds, number of, 231
Anti-kickback regulations, 33, 236 Behavioral change, 61
Antitrust laws, 147 Behavioral health, 2, 18, 89
API. See Application programming Benchmarking, 150–151, 248
interface (API) Berkshire Hathaway, 77, 78
App-based physician visits, 84 Best-of-breed vs. single source, 265
App-based telehealth visits, 84 Big Data, 78–79, 82, 144, 146, 152,
Apple, 78, 90, 96 154, 246, See also Data;
Apple Watch, 83, 90, 222, 223 Data pitfalls
Application programming interface The Big Data Boom, 78–79
(API), 78 Bill of Rights, 53
Apps, 89, 90 Bills. See Hospital bill
chronic care, 88 Binary Stream, 265
clear alert systems, 153 Black, Paul, 152
developers, 280 Blockchain, 76
effectiveness of, 162 Blogs, 51–52, 171, 265, 266
mobile health, 76, 115 Blue Cross, 13, 23
patient-scheduling, 88 BMJ, 87
phone, 75 Body fat metrics, 62
physician-visit, 84 Boiler-plate proposal, 174
tablets, 75 Boren Amendment, 10, 11
telehealth, 84 Bottom line, 164
triage, 88 Breach notifcation practices, 31
Arizona’s fab tax, 60–61 Budget, 213–214
Artifcial indices, 61–62 Bundled payments, 4, 75, 218,
Artifcial intelligence (AI), 77, 80, 258 See also Payment
Index ◾ 291
Business associate agreements, 31 Chief information offcer (CIO), 81,

Business functions, 90–91 166, 276–277
Children’s Health Insurance
C Program (CHIP), 6, 8,
10, 53
CAHs. See Critical access hospital Chronic care apps, 88
(CAH) Chronic pain, 211, 212
Cancer care, 2 Cigna, 23
Capacity reporting projects, 249 CIO. See Chief information
Cardiologists, 14, 126, 155 offcer (CIO)
Care. See specifc entries Claims
Care coordination, 88, 114–115, complete, 148
217–219 false about product/services,
Caregiving, 1, 191 122–123
Catastrophic care, 53–55 marketing, 123
Causality vs. association, 116–119 non-credible, 123–124
Cecil G. Sheps Center for Health Client(s)
Services Research, 19 endorsement, 113–114
Cell phones. See Smartphones hometown, 124–125
Center for Health Transformation, non-tech savvy, 136–138
56, 61 potential, See Potential clients
Centers for Disease Control and Clinical applications, 90–91
Prevention, 58 Clinical clout, 256
Centers for Medicare & Medicaid Clinical credibility, 115, See also
Services (CMS), 9, 32, 39 Credibility pitfalls
Certifcate of need (CON), 231, Clinical decision support
243–244 software, 152
Certifed registered nurse Clinically oriented healthcare
anesthetists (CRNA), 104 projects, 144
Challenges, 165–172 Clinical product
clinical validity, 116 with minimal clinical validity,
data, 70, 147–150 114–115
economic, 52–53 without credible clinicians/
emails, 166–167 advisory board, 116
emergency department (ED), 112 Clinical research, 90
funding, 12 Cloud storage, 75
hospitals, 30, 140 Clout. See Clinical clout
leverage, See Leverage Cluttered inbox syndrome, 172
schedules, 165–166 CMS. See Centers for Medicare &
uninsured, 16 Medicaid Services (CMS)
update programs and Communications
applications, 279 among providers, 89
Chamber of Commerce, 170 blogs, 171
292 ◾ Index
email, 171–172 cost of, 48

healthtech revolution, 88–89 HIPAA, 81, 83
information source for with human resources
patients, 88 regulations, 182
lack of uniform IT protocols, with Medicare billing
41–43, 45 protocols, 42
pitfalls, See Communications patient, 126
pitfalls regulations, 239
standards and protocols, 42 CON. See Certifcate of need (CON)
technologies, 75 Conficts, ROI pitfalls, 252
via apps and email, 89 Confusion
website, 175 over association vs. causality,
Communications pitfalls, 163–190 116–119
challenges, 165–172, See also over regulations, 36, 45
Challenges total cost, 46, 48
competitors’ products, 172–173 unit cost, 46, 48
email, 166–167 Congress, 11, 59
healthcare mission, 163–165 Contract lock, 226
meeting with healthcare Cost(s)
organization, 185, 186 of acquisitions, 196, 220
potential client, 190 economic, 53
product features, 173–174 hospitals, 5, 205–208
product knowledge, 179–181 marginal, 205–208
product need, 184–186 production, 137
product overselling, 181–182 total, 46, 48, 52
product positioning, 187, unit, 46, 48
188–189 Cost shifting, 16–18
product presentation and Coventry, 23
marketing, 178–179 Coverage
product pricing, 186–188 for adult children, 54
research on competitors’ denial, 53
products, 173 healthcare, See Healthcare
schedules, 165–166 coverage
unfocused message about insurance, 6
product/services, 182–184 for life-threatening situations, 54
website, 174–177 Medicaid, 9
Comparison projects, 149 universal healthcare, 5
Complete claims, 148 CPT. See Current procedural
Complexities, organizational/ terminology (CPT)
operational pitfalls, Credibility pitfalls, 103–127
271–273 client endorsement, 113–114
Compliance clinical product with minimal
checks, 278 clinical validity, 114–115
Index ◾ 293
clinical product without credible interpreting, 154–156

clinicians/advisory latency, 72
board, 116 mapping, 72
confusion over association vs. recognition, 155
causality, 116–119 reporting, 155–156
developmental partner, 111–113 security, 72, 157–158, 276
ethics, 119–121 sets, 154, 155
false claims about product/ sharing, 248–249
services, 122–123 transfer, 69, 158, 162
healthcare outsider, 103–106 UB-04, 145, 146
healthcare protocol, 106–110 Data access, 154, 240–241, 248,
healthcare strategic plan, 110–111 See also Alarm Fatigue
hometown clients, 124–125 Syndrome
lack of uniformity of patient Database analysis, 229
inputs, 125–127 Data Lake, 144
non-credible claims, 123–124 Data pitfalls, 143–156
overview, 103 access organization’s data, 154
potential investors and age of data, 147–150
customers, 212 Alarm Fatigue Syndrome, 152–153
Credulity, 123 interpreting, 154–156
Critical access hospital (CAH), 2, local peer data for
140, 272 benchmarking, 150–151
CRNA. See Certifed registered quality/integrity, 143–147
nurse anesthetists (CRNA) regional peer data for
C-Span, 152 benchmarking, 150–151
C-suite people, 165, 256 Data sharing, 248–249
Current procedural terminology Dead end products, 159
(CPT), 69 Decisions, 271–273
Customer, 27–28, 212 diagnostic, 1
purchasing, 27–28
D software for clinical support, 152
De-marketing, 181
Data, 247, 248–249, 259, See also Demographic change, 164
Bad data; Big Data; Data Demonstrable ROI, 192–194, 208–210
pitfalls Department of Health and Human
aging, 147–150 Services, 41, 243
benchmarking, 150–151 Determinants of health, 50, 51, 62
cleansing, 146, 148, 229 Developers, 280
collection, 145, 229 Developmental partner, 111–113
compatibility, 72 Devices, See also Diagnostic
defnitions, 72 equipment
handling, 158 electronic, 136
integrity, 72 implantable, 80, 84
294 ◾ Index
medical, 77, 276 EHR. See Electronic Health

plug-in smartphone Record (EHR)
peripheral, 84 Electrocardiogram (EKG), 82, 83,
stand-alone mode, 161–162 222–223
wearable, 76, 77, 153 Electronic devices, 136, See also
wirelessly connected, 77 Wearable devices
Dexterity. See Physical dexterity Electronic Health Record (EHR),
Diabetes, 51, 117, See also Obesity 32, 81, 152, 246, 247, 261,
Diagnosis, Medicare 267, 281
readmissions, 216 artifcial intelligence in, 77
Diagnosis-Related Groups (DRG), costs, 227
33–34, 36, 69, 123, 192, data transfer, 69, 72
206, 208, 219–220 protocols, 41–42
Diagnostic decisions, 1 vendor transitioning, 190
Diagnostic equipment, 83, See also Elevator pitch, 169, 181
Devices Emails
Digital health market, 75 challenges, 166–167
Direct-to-consumer telehealth, communication, 171–172
223–224 delete, 167
Direct patient care, 2 out-bound, 117
Discharge, 1, 150 phone call, 177
Disproportionate Share Hospital Emergency Department (ED), 29,
Program (DSH), 9 42, 53, 54, 112, 152
Disruption, 275 Emergency medical technician
Disruptive healthcare (EMT), 30
technology, 82 Emergency Medical Treatment and
DNA sequencing, 83 Active Labor Act of 1986
DNV GL Healthcare, 277 (EMTALA), 29–30, 37,
Double-blinded study, 114 42, 53
Drake, David, 76 Emerging healthcare technology,
DRG. See Diagnosis-Related 82–83
Groups (DRG) EMT. See Emergency medical
Drucker, Peter, 3, 271 technician (EMT)
DSH. See Disproportionate Share EMTALA. See Emergency Medical
Hospital Program (DSH) Treatment and Active Labor
Duplicative quality reporting Act of 1986 (EMTALA)
programs, 32 Enemy, 259–261
Enhanced information-based care,
E 85–88
care coordination, 88
ED. See Emergency evidence-based medicine, 87–88
Department (ED) precision medicine, 86
Education. See Medical education predictive analytics, 86–87
Index ◾ 295
Entrepreneurs, 73, 95, 108, 131, 136 Feedback, 113–114, 133, 134,
innovative, 175 185, 285
offering disruptive products, 265 Fee-for-service, 4
preparing products for market FICO® scores, 56, 59, 62, 63
introduction, 96 Financial climate, 193
reducing unnecessary Financial incentives, 215–217
readmissions, 215 Financial information, 231
Environmental elements, impact Financial negative, 198
on health, 50 Financial pitfalls, 211–236
EpicParodyEMR, 281 additional insurance, 214–215
Erlanger Medical Center, 125 expenditure approval, 213–214
Ethics, 119–121 healthcare providers revenue,
Ethnicity and race, 62 222–226
Evidence-based medicine, 87–88 incentives, 215–219
Exercise, 62 negative implications, 220–222
Expenditure approval, 213–214 organizational hindrance,
Expense, non-clinical technology, 226–227
68–73 payment regulations, 219–220
External political pitfalls, 245–249 payment structure, 236
data sharing, 248–249 pricing schedule, 228–236
hyper-vigilant privacy, 245–247 sales projection, 211–213
Financial positive, 198–200
F Financial projections, 205, 208, 210
Financial risk, 204, 216, 218
Facilities management, 182 Financial Sustainability Committee,
Fallacies, ROI, 194–205 165–166
additional patients as fnancial Financing. See Healthcare fnancing
positive, 198–200 First world nation, 5
potential savings, 194–196 Fixed/capitated payment, 198
product revenue generation, Flab tax, 60–61
196–198 FMAP. See Federal Medical
projections, ROI, 200–205 Assistance Percentage
False claims about product/services, (FMAP)
122–123 Food and Drug Administration
Family medical history, 63 (FDA), 73, 114, 222, 223,
Family physicians, 2, 14, 156, 242, 243–244
See also Physicians Forbes, 13
FDA. See Food and Drug Ford, 79
Administration (FDA) Foreign language, 136
Federal government, 2, 9–10, 14, 41 For-proft companies, 163
Federal Medical Assistance Fraud, 32–33, 35–36
Percentage (FMAP), 9 Full-time equivalent (FTE),
Federal Reserve, 82 32, 195
296 ◾ Index
G HCPCS. See Healthcare Common

Procedure Coding System
GAHE. See Georgia Association (HCPCS)
of Healthcare Executives Health, determinants of, 50, 51, 62
(GAHE) Health Affairs, 223
GaHIN. See Georgia Health Health and Human Services (HHS),
Information Network 178, 243
(GaHIN) Healthcare
General practitioners, 2, See also coverage, 52, 53
Physicians data, See Data
Genetic predisposition, 59 delivery, 4, 67, 81, 143, 163, 164,
Genomic classifcation, 69 197, 228, 271, 280
Genomic expansion, 83 information, 1
Georgia Association of Healthcare insurance, See Insurance
Executives (GAHE), 108–109 interventions, 1
Georgia Department of Community mission, 163–165
Health (DCH), 12 monollithic, 139–140
Georgia Health Information outsider, 103–106
Network (GaHIN), 165 protocol, 106–110
Georgia Hospital Association reform, 16
(GHA), 11, 33, 70–71, 105, spending, 32, 55
120, 124, 170 strategic plan, 110–111
Geriatricians, 2 subgroups, 119
Gingrich, Newt, 56 Healthcare Common Procedure
Goozner, Merrill, 51 Coding System (HCPCS), 69
Gorilla marketing. See Guerilla Healthcare executives, survey, 111
marketing Healthcare Financial Management
GPO. See Group purchasing Association (HFMA), 169
organization (GPO) Healthcare fnancing, 1–24
Gretzky, Wayne, 95 cost shifting, 16–18
Group meetings, 118 hospitals, 2–4
Group purchasing organization insurance programs, 5–9
(GPO), 227 margins, 7–9
Guerilla marketing, 141–142 percentage, 6–7
physicians, 1–2
H uninsured, 16
Healthcare Marketing Tune-Up
HAC. See Medicare Hospital- Program, 187
Acquired Condition (HAC) Healthcare organizations, 31, 163,
Hard-hitting approach, 165 169, 192, 199
Hard sell techniques, 181, 182 Healthcare projects, 143–145
Haven, 78, See also Not-for-proft analyses, 145
organization Big Data, 144
Index ◾ 297
clinically oriented, 144 HFICO. See Health FICO (HFICO)

comparison, 149 HFMA. See Healthcare Financial
index, 144–145 Management Association
non-clinical, 143–144 (HFMA)
Healthcare providers, 222–226 HHS. See Health and Human
Healthcare spending, 32, 55 Services (HHS)
Healthcare technology HIMSS. See Health Information
categorizing, 80–83 Management Systems
changes, 74–75 Society (HIMSS)
costs, 73 HIPAA. See Health Insurance
disruptive, 82 Portability and
emerging, 82–83 Accountability Act of 1996
growth, 75–79 (HIPAA)
non-clinical, 68–73 Hometown clients, 124–125
revolution, See Healthtech Hospitalization, 47
revolution Hospital Readmissions Reduction
traditional, 80–81, 82 Program (HRRP), 215
transformational, 82–83 Hospitals, 2–4, 69
Health FICO (HFICO), 56–64 admissions, 7
burden for people with access, 4
individual coverage, 63 administrator, 193
data security, 62 bill, 36, 53, 54, 144
factors, 56, 57 challenges, 140
race and ethnicity, 62 community hospitals, 2
use for risk rating of patients, 57 compared with airport, 3
Health Information Management contractual relationships, 4
Systems Society cost, 5, 205–208
(HIMSS), 169 critical access, 2
Health Insurance Portability and developmental partner, 111–113
Accountability Act of 1996 fnancial risk, 3, 216
(HIPAA), 30–31, 63, 81, 83, fnancial wellbeing, 13
105–106, 182, 246 full-time equivalent (FTE), 32
HealthKit, 78 as governmental entities, 2
HealthLeaders, 22 integrity, 35
Health market, digital, 75 as investor-owned, 2
Healthtech revolution, 83–91 IT departments, 279
business functions, 90–91 losses, 19–20
clinical research, 90 Medicare and Medicaid shortfalls
communications, 88–89 on, 19–23
enhanced information-based as not-for-proft, 2
care, 85–88 payment cut, 14
mobile tools, 84–85 payment from uninsured, 16
physical items, 83–84 quality, 5
298 ◾ Index
reimbursement, 23 Infrastructure taxes, 160–161

relationship of physicians with, 3 In-house technology development,
revenue, 7, 8, 21, 253 278–280
ROI, 208–210 Innovative entrepreneurs, 175
spending, 35 Inpatient margin, 8
strategic plan, 110–111 Inpatient stay, 1
suburban community, 140 Insiders. See Industry insiders
as three-legged stool, 4–5 Insurance, 16
underpayments, 20 additional, 214–215
vendors, 277–278 private, 5–6, 6, 9, 21, 23, 55
HRRP. See Hospital Readmissions premiums, 55, 57
Reduction Program (HRRP) programs, 5–7, 6
Humana, 23 Insurance companies, 3, 28, 32, 51,
Human Genome Project, 86 58, 69
Human research protection Integrated systems, 162
protocol, 243–244 Integrity, 121
Human resources regulations, 182 Intellectual property, 176, 240
Hybrid payment system, 52–55, Interest rates, 82
See also Payment Internal champion, 256–257, 285
Hyper-vigilant privacy, 245–247 Internal end-users’ bandwidth,
280–282
I Internal medicine physicians, 14,
See also Physicians
ICD-9-CM medical coding system, 31 Internal policies, 31
ICD-10-CM medical coding system, Internal political pitfalls, 251–269
31, 69 enemy, 259–261
Implantable devices, 80 internal champion, 256–257
Implications, 53 job threats, 253–256
Implied promises, 275 losing sale, 262–264
In-body implantable sensors, 77 physicians buy-in right, 257–259
Incentives, 215–217 professional rivalries, 251–253
Index healthcare projects, 144–145, purchasing agent, 266–269
See also Projects single source vendor, 265
Individual market analysis, 228 Internet, 74, 75
Industry insiders, 133 Internet of Things (IoT), 80, 85
Industry outsiders, 131 Internists, 2
Information sharing, 115 Interpreting data, 154–156,
Information technology (IT) See also Data
departments, 279 Interstate 75, 11
infrastructure, 81, 83 Interventional services, 50
organizational/operational Interventional tools, 84
pitfalls, 276–277 Interventions, 1, 4, 28, 46, 50, 51
system conversion, 38–39 Intimate contact items, 77
Index ◾ 299
Investments, 227, See also Return anti-kickback, 33, 236

on investment (ROI) antitrust, 147
pitfalls; Venture capital employment, 64
(VC) investments fraud, 32–33
Investor-owned hospitals, 2 human resources, 182
Investors, 212 overbearing, 29–33, 45
IoT. See Internet of Things (IoT) payment, 219–220
Iron-clad security, 157 regulatory requirements, 31–33
Legitimate market, 129–132
J Letter of intent, 151
Leverage, challenges, 167–172
JAMA, 22, 87 Licensed beds, 231
Jenga, 271 Licensed practical nurse (LPN),
Job offer, 63–64 104, 105
Job threats, 253–256 Licensure regulations, 243–244
Joint Commission, 277 Lifestyle changes, 60
JPMorgan Chase, 77, 78 LinkedIn, 170
Local peer data for benchmarking,
K 150–151
Losing sale, 262–264
Kaiser Family Foundation, 5 Losses, hospitals, 19–20
Keckley, Paul, 19 LPN. See Licensed practical
Kitsiou, Spyros, 115 nurse (LPN)
Kiwanis, 170 Lucado, Max, 95
Kraus, Irene, 191
M
L
M4A. See Medicare for All (M4A)
Lack of uniformity of patient MA. See Medical assistant (MA)
inputs, 125–127 MACRA. See Medicare Access and
Lean process improvement, 90 CHIP Reauthorization Act
Legal/regulatory pitfalls, 239–244 (MACRA)
data access, 240–241, See also Madara, James, 260–261
Alarm Fatigue Syndrome Managed care, 37–38, 147, 151
non-disclosure agreements Manic depression, 47
(NDA), 239–240 Marginal cost per day, 205–208
overview, 239 Marginal revenue, 200, 252,
regulatory requirements, See also Revenue
243–244 Margins, 7–9, 19, See also Total
selling regulations, 242–243 margin
Legislations, 14, 29–33, 243–244 Market, See also Guerilla marketing
abuse, 32–33 analysis, 156
anti-fraud, 33 individual analysis, 228
300 ◾ Index
legitimate, 129–131, 132 Medical devices, 77

for precision medicine, 76 Medical education, 2
stock, 82 Medical emergency, 37–38
total digital health, 75 Medical history, 63
Marketing Medical research, 114
7 Ps of, 187 Medical specialists, 5
claims, 123 Medical vocabulary. See Vocabulary
guerrilla, 141–142 Medicare, 3, 6, 7, 13–15, 17, 17,
materials, 178–179 19, 55, 200, 215, See also
off-label, 242 Medicaid
Market misreading pitfalls, 139–142, funding for, 53
See also Market initiatives, 39–41
guerilla marketing, 141–142 legislations, 14
monolithic healthcare, 139–140 losses, 13
Market Planner software, 154–155 margins, 8
Market share, 146 patients, 215
Matthews, Jim, 14 payment for admission of
Media Tech Reviews, 74 inpatient, 34
Medicaid, 3, 6, 9–13, 19, See also payments compared to
Medicare Medicaid, 13
cost coverage, 17, 17 payment system of, 192, 219
coverage, 9 penalty, 216
expansion, 10 physician payments, 14, 15
federal budget, 11 readmissions, 123, 215, 216
fnancial stress, 12 technical loophole, 253
funded by federal government, 9 underfunding of, 28
funded by individual state Medicare Access and CHIP
governments, 9 Reauthorization Act
funding for, 53 (MACRA), 80
legislations, 14 Medicare for All (M4A), 21,
margins, 8–9 22–23, 55
net loss, 10 Medicare Hospital-Acquired
outpatient costs, 13 Condition (HAC), 39, 40
recipients, 10 Medicare Payment Advisory
related to CHIP, 10 Commission (MedPAC),
state budget, 11 13, 17
underfunding of, 28 Medicare readmissions, 123, 215, 216
underpayments, 12 Medications, 50
volume, 12 Medicine. See specifc entries
Medical assistant (MA), 105 MedPAC. See Medicare Payment
Medical bills. See Hospital bill Advisory Commission
Medical care, 1 (MedPAC)
Medical coder, 34 Meetings. See Group meetings
Index ◾ 301
Mental framework, 2 × 2 analysis, Non-clinical applications, 91

268, 268 Non-clinical healthcare projects,
mHealth, 76–77 143–144
Michigan Medicine, 192, 205 Non-clinical technology, 68–73
Millennials, 136 Non-cooperative vendors, 162
Misaligned fnancial incentives, Non-credible claims, 123–124
217–219 Non-disclosure agreement (NDA),
Mission, healthcare, 163–165 133, 176, 177, 239–240
Mission Effectiveness No-nonsense approach, 165
Committee, 164 Non-physician staff, 110
Mistakes, 36 Non-tech-savvy clients, 138
Mobile health apps, 76, 115, See Not-for-proft organization, 2,
also Apps 78, 137
Mobile tools, 84–85 Notices of privacy practices, 31
app-based physician visits, 84 NP. See Nurse practitioners (NP)
app-based telehealth visits, 84 Number of admissions, 231
Internet of Things (IoT), 85 Number of beds, 231
plug-in smartphone peripheral Nurse education, 182
devices, 84 Nurse helplines, 1
sensors, 84–85 Nurse practitioners (NP), 104
sensors to monitor Nursing homes, 69
environmental
conditions, 85 O
smartphones as a cost-
containment tool, 84 Obamacare. See Affordable Care
Modern Healthcare, 19, 20, 31, 51, Act of 2010 (ACA)
81, 87, 152 Obesity, 117, See also Diabetes
Monolithic healthcare, 139–140, 256 OB/GYN. See Obstetricians/
Motor Trend, 79 gynecologist (OB/GYN)
Obstetricians/gynecologist
N (OB/GYN), 2, 109, 224, 252
Occupational Safety and Health
National distribution of patients, 17 Administration, 42
NDA. See Non-disclosure agreement OCR. See Offce of Civil Rights
(NDA) (OCR)
Negative implications, 220–222 Offce of Civil Rights (OCR), 32
technology, 221 Offce of Human Research
The New England Journal of Protection, 243
Medicine, 58 Offce of the Inspector General
New Mexico, 12 (OIG), 32
The New York Times, 78, 152 Offce of the National Coordinator
Niche, 139, See also Positioning for Health Information
No-cost dental coverage, 61 Technology (ONCHIT), 32
302 ◾ Index
Off-label marketing, 242 P

Off-line activity, 170
OIG. See Offce of the Inspector PA. See Physician assistants (PA)
General (OIG) Packaging, 187
ONCHIT. See Offce of the National PACS. See Picture Archiving and
Coordinator for Health Communication System
Information Technology (PACS)
(ONCHIT) Parallel analysis, 22
Oncologists, 14 Patient admission, 1, 3
Operational change, 273 Patient care margin, 8
Oracle, 98 Patients
Oracle 2, 98 access to quality care, 5
Organizational data, 248–249 admission, 1, 3
Organizational hindrance, 226–227 bandwidth, 282–283
Organizational/operational pitfalls, care, 69
271–285 compliance, 126
change, 273–276 as customer, 28
complexities, 271–273 discharge, 1
information technology (IT), episode of care, 4
276–277 as fnancial positive, 198–200
in-house technology medical knowledge, 28
development, 278–280 national distribution of, 17
internal end-users’ bandwidth, post-acute placement, 88
280–282 progress tracking, 75
patients bandwidth, 282–283 recovery progress, 124
technology, 283–285 reimbursement from Medicare, 34
unexpected circumstances, 285 uniformity of inputs, 125–127
vendors, 277–278 Patient-scheduling apps, 88
Organizations, See also Accountable Payment, 231, See also Hybrid
care organization (ACO); payment system
Organizational/operational bundled, 4, 75, 218
pitfalls cut from hospitals, 14
healthcare, 31 delays due to IT system
managed care, 37–38 conversion, 38–39
not-for-proft, 137 margins from individual sources
Out-bound emails, 117 of, 8–9
Outbound patient progress alerts, 86 Medicare compared to
Outsider Medicaid, 13
healthcare, 103–106 physicians, 13
industry, 131 proposals, 53–54
Overbearing regulation, 29–33, 45, regulations, 219–220
See also Legislations revamping to create public/private
Overselling, 181–182 hybrid approach, 52–55
Index ◾ 303
revamping to incentivize patient, healthcare fnancing, 1–2

56–64 internal medicine, 14
single bundled, 4 liability, 15
structure, 236 medication management
uninsured to hospitals, 16 software, 152
Pediatricians, 2, 156 mindset, 192
Peer data for benchmarking, patient admission, 1, 3
150–151 patient discharge, 1
Peer-reviewed study, 114 payment, 13
Penalties, 60 primary care, 2
Percentage, 6–7 reimbursement, 23
of days patient spend in the relationship with hospitals, 3
hospital, 7 respect of, 106
of hospital admissions, 7 splitting admission, 140
of the population, 6 subgroups, 140
of revenue, 7 survey, 111
Personalized medicine, 82 Picture Archiving and
Pet peeves, 177 Communication System
Pharmaceutical research, 114 (PACS), 160
Pharmacies, 1 Pitfalls
PHI. See Protected Health communications, 163–190
Information (PHI) credibility, 103–127
Phone apps, 75, See also Apps data, 143–156
Phone calls, 177 external political, 245–249
Physical assets, 228 fnancial, 211–236
Physical dexterity, 137, 138 internal political, 251–269
Physical items, 83–84 legal/regulatory, 239–244
devices and implantables, 84 organizational/operational,
diagnostic equipment, 83 271–285
interventional tools, 84 product design, 129–138
Physical therapists (PT), 104, return on investment (ROI),
194–195 191–210
Physician assistants (PA), 104 technology, 157–162
Physician Payment Sunshine Act, 242 timing, 95–101
Physician Practice Planner Plagues, 163
software, 155 Plugged-in connected devices, 77
Physicians, 1–2, 69, 109 Plug-in smartphone peripheral
buy-in right, 257–259 devices, 84
as customer, 28 Political climate, 53
degree, 104 Population health management, 75
as direct patient care, 2 Positioning, 187, 188–189
discussion about clinical Post-acute patient placement, 88
effectiveness, 115 Post-discharge care, 1, 88
304 ◾ Index
Potential clients, 110, 190, 264, product development without

275, 285 adequate input from
engage, 187–188 potential users, 131–133
investments, 227 Product development, 116, 131–133
preexisting contractual Production costs, 137
restrictions, 226 Product launch
product development, 131–133 before fnancial policies, 99–101
unfocused message, 182–184 too early or too late, 96–97
vendor meeting with, 113 Products, 187
web page, 174–177 complexity for elderly, 138
Potential investors, 212 complexity for non-tech-savvy
Potential savings, 194–196 users, 138
Precision medicine, 82, 86 dead end, 159
Predictive analytics, 82, 86–87 description, 186–187
Pre-discharge care, 88 design, See Product design
Pre-emption analysis, 31 pitfalls
Pre-existing medical embracement, 192–194
conditions, 54 features, 173–174
Premature deaths, proportional knowledge, 179–181
contribution to, 59 launch, See Product launch
Prenatal care, 50 lines, 147, 159
Prevention, 49–52 need, 184–186
Preventive care, 46–52, 53–54 overselling, 181–182
Pricing/price, 186–188 positioning, 187, 188–189
Pricing schedule, 140, 228–236 presentation and marketing,
fnancial information, 231 178–179
number of admissions per pricing, 186–188
year, 231 Professional rivalries, 251–253
number of beds, 231 Projections
Primary care, 2, 14, 53–54, 153 fallacies, ROI, 200–205
Privacy revenue, 100, 213
hyper-vigilant, 245–247 sales, 211–213
vulnerabilities, 157–158 Projects
Private hybrid approach, payment analyses of healthcare, 145
system, 52–55 benchmarking, 150
Private insurance, 5–6, 6, 9, 21, Big Data healthcare, 144
23, 55 capacity reporting, 249
Product design pitfalls, 129–138 clinically oriented healthcare, 144
advisory board, 133–136 comparison, 149
legitimate market, 129–131 healthcare, See Healthcare
product complexity for elderly projects
or non-tech-savvy clients, index healthcare, 144–145
136–138 non-clinical healthcare, 143–144
Index ◾ 305
Promises, 275 reduction, 101, 215, 217

Promotion, 187 unnecessary, 123
Property. See Intellectual property Recommendations. See under
Proportional contribution to specifc pitfalls
premature deaths, 59 Regional peer data for
Proposal. See Boiler-plate proposal benchmarking, 150–151
Protected Health Information (PHI), Registered nurse (RN), 105
157–158, 246 Regulations. See Legislations
Protocol of healthcare industry. See Regulatory Overload Report, 32
Healthcare protocol Rehabilitation services, 2
Protocols Reimbursement, 23, 217–219, 223
healthcare, 106–110 Request for proposal (RFP), 120
human research protection, Research
243–244 academic, 2
universal data transfer, 69 clinical, 90
“Prudent layperson,” 37 competitors’ products, 172–173
PT. See Physical therapists (PT) medical, 114
Public health centers, 1 pharmaceutical, 114
Public hybrid approach, payment Research 2 Guidance (R2G), 76–77
system, 52–55 ResearchKit, 90
Purchasing Restructuring administrative
agent, 266–269 processes, 21
decision, 27–28 Return on investment (ROI) pitfalls,
Pushback, 147, 193, 235, 244, 274 191–210, 252
additional patients, 198–200
Q conficts, 252
cost per day, 205–208
Quality/effciency-related efforts, demonstrable ROI, 192–194,
257–258 208–210
Quality/integrity, data pitfalls, fallacies, 194–205
143–147 overview, 191
potential savings, 194–196
R projections, 200–205
revenue generation, 196–198
Race and ethnicity, 62, 70–71 Revenue
Radiation technologists (RT), 104 fnancial information, 231
Rates. See Interest rates healthcare organization, 199
Readmission, 123–124, See also healthcare providers, 222–226
Admission of hospitals, 7, 8, 21, 253
HRRP, 215 projections, 100, 213
Medicare patients, 123, 215, 216 ROI fallacy, 196–198
number of, 123 Rewards, 60
penalties, 216 RFP. See Request for proposal (RFP)
306 ◾ Index
Risks Skepticism, 115, 283–285

fnancial, 3, 204, 216, 218 Smartphones, 74–75, 77, 82
rating of patients for insurance app, 117–119
premiums, 57 application design, 138
RN. See Registered nurse (RN) as a cost-containment tool, 84
ROI. See Return on investment in environmental monitoring, 85
(ROI) pitfalls peripheral plug-ins, 82–83, 84
RT. See Radiation technologists (RT) physical dexterity, 137
Rural hospitals, 2, 19, 140, See also sensors, 84–85
Hospitals Smart pill boxes, 89
Smoke on the Mountain, 107
S Smoking cessation, 62
SNOMED Clinical Terms, 69
SaaS. See Software as a Service Social determinants of health, 50,
(SaaS) 51, 62
Sachs Group, 155 Social media, 170, 246
Sales Software, 229–230
goals, 168 clinical decision support, 152
losing, 262–264 developers, 280
projection, 211–213 Market Planner, 154–155
Sales executives, 168, 186, 272, 283 Physician Practice Planner, 155
Sample size analysis, 146 physicians medication
Sanders, Bernie, 22 management, 152
Savings, 46–48, 194–196 Software as a Service (SaaS), 75,
Schedules 178, 255, 279
challenges, 165–166 Software-driven analyses, 229–230
pricing, 140, 228–236 Spending. See Healthcare
Schizophrenia, 47 spending
Schroeder, Steven A., 58 Sports Illustrated, 173
Screening, 50 Staffng, 195, 228–229, 256
Secret sauce, 176 additional, 221
Security challenges, 140
data, 72, 276 direct, 47
iron-clad, 157 inpatient, 47–48
system, 157–158 technology, 221
Selling regulations, 242–243, Start-ups, 97–99, 136, 175
See also Legislations State-of-the-art products or services,
Sensors, 77, 79, 84–85 158–160
Sequencing. See DNA sequencing Stock market, 82
Single bundled payment, 4 Storage. See Cloud storage
Single source vendor, 265 Strategic plan, 110–111
Single source vs. best-of- Study. See Double-blinded study;
breed, 265 Peer-reviewed study
Index ◾ 307
Subgroups Technophobia/technophobic,
healthcare, 119 266–269, 284
physicians, 140 Telemedicine, 100, 224, 225
Subsidized care, 50 Teleradiology, 89
Suburban community hospital, 140 Telesitter, 89
Symplr, 278 This Week’s Blog, 171
System security, 157–158 Thorpe, Kenneth, 22
Threats
T job, 253–256
technology, 222–224
Tablets, 74–75, 77, 136, 138 Three-legged stool, 4–5, 22
Tactics, 141, 142, See also Guerilla Timing pitfalls, 95–101
marketing overview, 95–96
Tax(es) product launch before fnancial
Arizona’s regressing approach, policies, 99–101
60–61 product launch too early or too
cost shifting, 18 late, 96–98
hybrid payment system, 55 start-ups, 97–99
Medicare for All (M4A), 22 Tools. See Interventional tools;
Technical loophole, 253 Mobile tools
Technology, 185, 195, 212, 224, Topol, Eric, 84–85
See also Technology pitfalls Total cost, 46, 48, 52
affect staffng, 221 Total digital health market, 75
effciency, 196 Total margin, 7–8
healthcare, 211 Traditional healthcare technology,
investments, 227 80–81, 82
operational process, 197 Training, 15, 31, 104, 121, 204, 221, 229
organizational/operational Transformational healthcare
pitfalls, 283–285 technology, 82–83
staffng, 221 Triage apps, 88
threats, 222–224 Tri-Care program, 9
time-saving, 195–196 True medical emergency, 37–38
vendors, 279 Tweets, 281
Technology Committee, 165–166 Twitter, 281
Technology pitfalls, 157–162,
See also Technology U
devices having stand-alone
mode, 161–162 UB-04 data, 145, 146
infrastructure taxes, 160–161 Unexpected circumstances,
privacy vulnerabilities, 157–158 organizational/operational
state-of-the-art products or pitfalls, 285
services, 158–160 Unfocused message about product/
system security, 157–158 services, 182–184
308 ◾ Index
Unfunded mandates, 29–33, 45 from outside the healthcare

Uniformity of patient inputs, 125–127 industry, 104
Uninsured, 16, 18, 21, 53, 198–199 securing additional cybersecurity
Unit cost, 46, 48 insurance coverage, 214
UnitedHealthcare, 9 single source, 265
United States Bill of Rights, 53 small, 159
Universal data transfer protocols, 69 technology, 279
Universal healthcare coverage, 5 UB-04 data, 146
U.S. News and World Report, 22 Venture capital (VC), 76
Vietnam War, 141
V Vocabulary, 105, 110
Value-based care, 4 W
Value-based purchasing, 75
Vendormate, 278 Wall Street Journal, 152
Vendors Wearable devices, 76, 77, 83,
change, 264 89, 153
credulity, 123 Website, 174–177, See also
excitement about products and Communications
software, 178 What’s behind America’s epic fail
fallacy committed by, 194–200 on diabetes care, 51–52
fnancial problems, 99–100, See Wirelessly connected devices, 77,
also Financial pitfalls See also Electronic
hospitals, 277–278 devices
large, 159 Woodwork Effect, 48, 49
non-cooperative, 162 Workfow change, 105
organizational/operational Workload, 234, 273–276
pitfalls, 277–278 World War II, 131

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“Glenn Pearson does a masterful job making the complexities

easy and understandable, while providing industry outsiders

“Peter Drucker believed that healthcare was the most complex of

“Interesting, engaging and informative with good examples. As

“One of the underlying principles in this book is the impor-

“I often cringe at the lack of financial analysis and credible

“Glenn’s expansive knowledge and in-depth industry experi-

“Glenn delivers a well-organized narrative that demystifes the

“This would be a great book for anyone preparing for a career

“This is wonderful. I got a good chuckle out of his scenarios.

“Glenn Pearson’s explanation of how the healthcare system is

“The chapter on approaches for reforming the healthcare system

“Glenn Pearson is like a one-man think tank.”

Glenn E. Pearson, FACHE

© 2020 by Glenn E. Pearson, FACHE

No claim to original U.S. Government works

Printed on acid-free paper

International Standard Book Number-13: 978-0-367-18329-5 (Paperback)

Trademark Notice: Product or corporate names may be trademarks or registered trademarks,

Visit the Taylor & Francis Web site at

and the CRC Press Web site at

Acknowledgments ........................................................... xvii

1 The Jacked-Up World of Healthcare

3. Unfunded Mandates and Overbearing Regulation .......29

3 Three Ideas to Make Things Better.......................45

4 The Six Fronts of the Healthtech

Why Are Things Changing Now? ......................................74

6 Credibility Pitfalls ...............................................103

13. Falsely Claiming to be the Only Company

8 Market Misreading Pitfalls ..................................139

9 Data Pitfalls .........................................................143

25. Lacking Local and/or Regional Peer

10 Technology Pitfalls .............................................. 157

36. Having an Inadequate Web Page That Fails to Let

49. Confusing Average Hospital Cost Per

14 Legal and Regulatory Pitfalls ..............................239

15 External Political Pitfalls.....................................245

16 Internal Political Pitfalls ..................................... 251

74. Losing Out Because the Organization

83. Suffering Because of Sub-Optimal

Final Thoughts................................................................... 287

This book has been greatly improved through the generous

Glenn Pearson has worked in the hospital industry for more

For three years, Glenn served as elected American College

national, regional, statewide, and local boards, committees and

◾ Association of Healthcare Enterprises

He was also the founding president of what is now the

At 18% of GDP, healthcare represents a hugely attractive

Why This Book?

1. My 35 Years as a Healthcare Executive

understanding of the inner workings of large healthcare orga-

The mainstream focus of my job was policy, fnance, data, and

◾ Fleshing out the concept

◾ Developing the marketing strategy

At GHA, I also led teams that designed major offerings

◾ Health Insurance Portability and Accountability Act

Each of these was a big success both in terms of addressing

3. Supplemental Insights from Leading

additional assurance that these are reality-tested recommen-

Who This Book Is For

◾ Technology innovators and entrepreneurs

Although the recommendations in this book are addressed to

How the Book Is Organized

may not be reasonable for leaders with jam-packed schedules,